Application of a Certificate of Lower/NIL TDS Deduction

All about the application of a Certificate of Lower/NIL TDS Deduction

We first try to understand the case before providing you with a complete list of details required to issue the CA certificate for transferring funds when remitting funds out of India with different sources of funds. This way, the online process of 15cb and online filing of form 15ca are completed with minimal exchange of unnecessary details, saving both of us a significant amount of time. Despite the time difference between different time zones, we try to be available even at odd hours to answer your questions.

A Lower Deduction Certificate of TDS is a provision under Section 197 of the Income Tax Act, 1961 that allows taxpayers to request deduction of tax at source (TDS) at a lower rate or even nil rate. This can be beneficial for taxpayers whose effective tax liability is lower than the standard TDS rate.

Purpose: Section 197 helps in reducing the TDS burden for individuals and entities whose actual tax liability is lower than the amount being deducted at the applicable TDS rate. This ensures that they do not face liquidity issues due to higher TDS deductions.

How long does it take to issue these certificates?

The amount of time it takes to issue these certificates is determined by how quickly we get the appropriate information. We’ve also released 15ca and 15cb in the same day.

Who Can Apply?

Any taxpayer, including individuals, companies, or other entities, can apply for a lower or nil deduction of TDS. Common scenarios where this application is made include:

• Loss-making businesses: Companies with no taxable income or those with business losses.
• Low-profit businesses: Businesses with profit margins lower than the applicable TDS rates.
• Assessees with carried-forward losses: Taxpayers who have losses from previous years that they can set off against current income.

What is the difference between a lower/nil TDS deduction certificate and a higher/nil TDS deduction certificate?

If a resident makes a payment to a non-resident, withholding tax at the appropriate rate must be deducted. However, if the income tax rate applicable to that nonresident on such income is less than the applicable withholding tax rate, that NRI can request that the income tax authorities issue a lower/NIL TDS deduction certificate based on his circumstances to avoid the hardship of paying a higher TDS rate.

How long does it take to get a NIL/Lower TDS certificate, and who issues them?

When a nonresident sells an immovable property (held for a long time) in India, the buyer is required to deduct withholding tax at the rate of 20% (plus edu cess, surcharge, and so on) from the sale consideration. To obtain a refund of the extra TDS deducted, the nonresident seller must file his tax return in India, which he can only do after the end of the fiscal year. It could take months or years to complete the process and receive the refund. To avoid this hassle, a person can apply to the income tax authorities for a lower or nil TDS deduction certificate for NRI, depending on his situation. This service is now available on the internet. Nonresidents who use this service can avoid paying a large withholding tax.

Application Requirements a lower/nil TDS deduction certificate: The taxpayer needs to submit several documents while applying, such as:

• • PAN card and address proof of the deductee (person receiving the payment).
  • Tax deduction and collection account number (TAN) and PAN of the deductor (person making the payment).
  • Form 13: The application form for requesting lower or nil TDS.
  • Copies of Income Tax Returns (ITRs) for the past 3 years.
  • Audited balance sheet, profit and loss account, and audit report for the past 3 financial years.
  • Original letter of authority (if an agent or CA is applying on behalf of the taxpayer).

Assessment by the Assessing Officer (AO):

• The AO evaluates the current and projected income of the taxpayer, and the estimated tax liability for the ongoing financial year. Based on this assessment, the AO determines whether lower or no TDS is applicable. AO is required to process the application and issue the certificate within 30 days from the date of application.

Is it necessary for an NRI to be present in order to obtain a reduced deduction certificate?

Not precisely; he can appoint someone to act on his behalf and have it completed in his present residence country. You can delegate end-to-end TDS management to IFCCL.

How can I get a TDS exemption certificate for a property sold by an NRI?

To acquire a NIL or No TDS Certificate, a calculation must be provided along with other papers to satisfy the Assessing Officer that the assigned property sale resulted in no capital gain.

Use of the Certificate: Once issued, the certificate must be attached to the invoice submitted to the deductor, serving as proof for lower tax deduction. The certificate is valid only for the specific financial year mentioned and must be reapplied for each subsequent year.

How to Get a Certificate of Nil/Lower TDS Deduction with Our Help?

Despite the fact that this online facility was only launched recently, we have already obtained these Lower/Nil TDS deduction certificates for many of our clients. We will ask you to send us the necessary documents so that we can file the application for TDS deduction details online and a lower/NIL TDS deduction certificate on your behalf. We will continue to follow up with you and keep you updated on the status of your application. We will do our best to obtain the certificates as soon as possible.

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