Mitali
Section 197 offers taxpayers both residents or non-residents, individuals, firms or companies whose actual tax liability is likely to be lower than the standard TDS rate to apply for a certificate that permits nil or reduced TDS deduction on specified incomes.
For a freelancer, incomes such as "professional or technical fees", which normally attract TDS, are eligible under Section 197.
How to apply for Lower or Nil TDS?
- Submit an application using Form 13 to the relevant Assessing Officer (AO).
- The application can be filed online via the TRACES portal (for PAN holders).
In Form 13, you need to provide:
- An estimate of your total income for the financial year.
- Estimated tax liability on that income after accounting for deductions, exemptions or losses.
- Details of the payers (clients) — their TAN or PAN, if required.
- Upload supporting documents such as past four years ITR filings, Form 26AS/TDS details and financial statements where relevant.
- Registration/Exemption Certificate in case of certain entities covered under section 11 or 12 or 139(4C).
- Once submitted, the AO reviews the application and may seek clarifications, and then issues a certificate specifying the nil or lower TDS rate and its scope.
- The issued certificate can be shared with deductors, who then deduct tax per the certificate — not the standard TDS rate.
- The certificate is validity will be only for the financial year. For next Financial Year you will need to reapply.
Note
You cannot use Section 197 for TDS already deducted, the relief is only prospective, so the certificate must be in place before payment/credit.
Depending on the AO’s decision and the application, one certificate can be made valid for multiple deductors, or separate certificates can be issued; all relevant deductors must be mentioned in Form 13.
Having a certificate it does not always mean there will be zero TDS; it can specify nil, lower or fixed rates, and deductors must follow exactly what is stated in the certificate once they receive it.
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