Lower TDS certificate under Section 197

Section 197 allows a payee to apply to the Assessing Officer in Form 13 for a certificate authorising TDS at a lower rate or nil rate, where the normal TDS would exceed the payee's likely tax liability. The deductor then deducts at the certified rate for the period and amount specified.

When to use it

A lower-deduction certificate helps where normal TDS would block more cash than the eventual tax — for example, a loss-making company, an entity with large refunds, a non-resident with treaty relief, or a contractor with thin margins. Instead of deducting at the full rate and waiting for a refund, the payee gets a certificate for a reduced rate.

The process

1. The payee files Form 13 online (TRACES), with financials and a tax projection.
2. The Assessing Officer examines and, if satisfied, issues a certificate specifying the rate, the amount/period and the deductors.
3. The payee shares the certificate with the deductor.
4. The deductor deducts at the certified rate and reports the certificate number in the TDS return.

Section 197A: self-declaration route

For certain payees, no AO certificate is needed — Section 197A allows a self-declaration in Form 15G/15H for nil deduction on interest and specified incomes where total income is below the taxable limit.

Practical points

• The certificate is valid only for the period and amount stated — track the limit.
• It is deductor-specific; each deductor named must hold a copy.
• Apply early in the year to maximise the cash-flow benefit.
• For non-residents, 197 interacts with Section 195 and the DTAA rate.