General Provisions of Section 197 with reference to TDS Certificate at Lawer Rate
Certificate for Deduction at Lower Rate or No Deduction of Tax from Income [Section 197(1)]
Tax Not to be Deducted or Tax to be Deducted at the Rate Specified in the Certificate [Section 197(2)]
No Certificate to be Issued if PAN is Not Provided [Section 206AA(4)]
The Board allowed to make rules for the above purpose [Section 197(2A)]
No TDS Deduction to be made in certain cases [Section 197A]
No deduction of tax on any payment made to New Pension System Trust [Section 197A(1E)]:
No Deduction of Tax on Specified Amount to Notified Institution, Association or Body, etc. [Section 197A(1F)]:
(1) Certificate for Deduction at Lower Rate or No Deduction of Tax from Income [Section 197(1)]
(A) Sections for which certificate for deduction at lower rate or no deduction of tax from income can be obtained:
As per section 197(1), subject to the rules made by the Board under section 197(2A), where in the case of any income of any person, income-tax is required to be deducted at the time of credit or as the case may be, at the time of payment, at the rate in force under the following sections the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rate or no deduction of income-tax, as the case may be, the Assessing Officer shall on the application made by the assessee in this behalf, give to him such certificate as may be appropriate.
- Section 192 — Salary;
- Section 193 — Interest on securities;
- Section 194 — Dividends;
- Section 194A — Interest other than 'Interest on securities';
- Section 194C — Payments to contractors and sub-contractors;
- Section 194D — Insurance commission;
- Section 194G — Commission, etc. on sale of lottery tickets;
- Section 194H — Commission or brokerage;
- Section 194-I — Rent;
- Section 194J — Fees for professional or technical services;
- Section 194K — Income in respect of units;
- Section 194LA — Payment of compensation on acquisition of certain immovable property;
- Section 194LBB — Income in respect of units of investment fund;
- Section 194LBC — Income in respect of investment in securitisation trust;
- Section 195 — Other sums.
(B) Section for which Certificate for Deduction at Lower Rate or No Deduction of Tax from income cannot be obtained
The assessee cannot obtain certificate for lower rate or nil rate of tax deduction from the Assessing Officer in the case of following sections
- Section 192A — payment of accumulated balance due to an employee from recognized provident fund;
- Section 194B — Winning from lotteries, cross word puzzles;
- Section 194BB — Winning from a horse race;
- Section 194DA — Payment in respect of life insurance policy;
- Section 194E — Payment to non resident sportsmen or sport association;
- Section 194EE — Payment in respect of deposits under National Saving Scheme;
- Section 194-IA — Payment in respect of transfer of certain immovable properties (other than agricultural land);
- Section 194-IB — Payment of rent by certain individuals or Hindu undivided family
- Section 194-IC — Payment under specified agreement referred to in section 45(5A)
- Section 194LB — Income by way of interest from infrastructure debt fund;
- Section 194LBA — Certain income from units of a business trust;
- Section 194LC — Income by way of interest from Indian company;
- Section 194LD — Income by way of interest on certain bonds and Government securities;
- Sections 196A, 196B, 196C and 196D.
(2) Tax Not to be Deducted or Tax to be Deducted at the Rate Specified in the Certificate [Section 197(2)]
Where such certificate is given, the person responsible for paying the income, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.
(3) No Certificate to be Issued if PAN is Not Provided [Section 206AA(4)]
As per section 206AA(4), w.e.f. 1.4.2010, no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number of the applicant. (For Relaxation from deduction of tax at higher rate under section 206AA. See rule 37BC)
(4) The Board allowed to make rules for the above purpose [Section 197(2A)]
The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under section 197(1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.
(5) No TDS Deduction to be made in certain cases [Section 197A]
In case of an individual who is resident in India [Section 197A(1)].—
No tax will be deducted at source under sections 194, 194EE, in case of an individual who is resident in India, if such individual furnishes to the payer a declaration in writing in duplicate in Form No. 15G to the effect that tax on his estimated total income (including such income) will be nil.
In case of a person (not being a company or a firm) [Section 197A(1A)].—
No tax shall be deducted at source under sections 192A, 193, 194A, 194D, 194DA, 194-I or 194K in case of a person (not being a company or firm), if such person furnishes to the payer a declaration in writing in duplicate in new Form No. 15G to the effect that the tax on the estimated income including such income will be nil.
(6) No deduction of tax on any payment made to New Pension System Trust [Section 197A(1E)]:
Notwithstanding anything contained in this Chapter, no deduction of tax shall be made from any payment to any person for, or on behalf of, the New Pension System Trust referred to in section 10(44).
(7) No Deduction of Tax on Specified Amount to Notified Institution, Association or Body, etc. [Section 197A(1F)]:
No deduction of tax shall be made from such specified payment to such institution, association or body or class of institutions, associations or bodies as may be notified by the Central Government in the Official Gazette, in this behalf.
The following notifications have since been issued in this behalf.
No TDS on payment for acquisition of software in a subsequent transfer
Payment by a person (hereafter referred to as the transferee) for acquisition of software from another person, being a resident, (hereafter referred to as the transferor), where—
- the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification,
- tax has been deducted—
- under section 194J on payment for any previous transfer of such software; or
- under section 195 on payment for any previous transfer of such software from a nonresident, and
- the transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor.
No TDS on certain payments made by a person to Scheduled Banks, etc.
No deduction of tax under Chapter XVII of the said Act shall be made on the payments of the nature specified below, in case such payment is made by a person to a bank listed in the Second Schedule to the Reserve Bank of India Act, 1934, excluding a foreign bank, or to any payment systems company authorised by the Reserve Bank of India under Sub-section (2) of Section 4 of the Payment and Settlement Systems Act, 2007, namely—
- bank guarantee commission;
- cash management service charges;
- depository charges on maintenance of DEMAT accounts;
- charges for warehousing services for commodities;
- underwriting service charges;
- clearing charges (MICR charges) including interchange fee or any other similar charges by whatever name called charged at the time of settlement or for clearing activities under the Payment and Settlement Systems Act, 2007;
- credit card or debit card commission for transaction between merchant establishment and acquirer bank.