If you’re expecting to receive payments where TDS will be deducted at standard rates, but your actual tax liability is lower or zero, you can apply for a Lower or NIL TDS Certificate from the Income Tax Department under Section 197.
This certificate allows the payer (deductor) to deduct TDS at a lower rate or not deduct at all, thereby improving your cash flow and avoiding refund delays.
This blog explains how to apply for a Lower or NIL TDS Certificate, step-by-step, for FY 2024-25.
Legal Reference
- Section 197, Income Tax Act, 1961
- Rule 28AA, Income Tax Rules, 1962
- Form 13 – Application for lower/nil deduction
- TDS-CPC & TRACES Platform: https://tdscpc.gov.in
Who Can Apply for a Lower/NIL TDS Certificate?
You may apply for a certificate under Section 197 if:
- You expect TDS to be deducted, but your estimated tax liability is lower or NIL
- You are a:
- Resident or Non-Resident Individual
- Trust, Company, LLP, or Partnership Firm
- Freelancer, consultant, or contractor
- NRI selling property in India (especially under Section 195)
Common use cases:
- Interest from banks or bonds
- Contractor payments
- Commission or brokerage
- Rent or professional fees
- Dividend income (before budgeted DDT changes)
- NRI property sale (request under 195/197)
Benefits of Applying
- Avoid excess TDS deduction and waiting for refund
- Improve monthly cash flow for businesses and individuals
- Minimize need to file refund-based returns
- Useful for seasonal or one-time income earners
Step-by-Step Process to Apply for Lower/NIL TDS Certificate
Step 1: Visit https://www.incometax.gov.in and login with PAN
Step 2: Navigate to e-File > Income Tax Forms > File Income Tax Forms
Step 3: Choose Form 13 (Application for Lower/Nil Deduction)
Step 4: Fill basic details:
- Financial Year (2024-25)
- Nature of payments (interest, rent, professional fees, etc.)
- PAN of deductors (payers)
- Projected total income and tax computation
- Details of TDS already deducted, if any
Step 5: Upload supporting documents:
- Previous year’s ITR and computation
- Audited financials (if applicable)
- Rent agreements, invoices, projections, Form 26AS
- Justification for lower/nil deduction
Step 6: Submit the application using DSC (for firms/LLPs/companies) or EVC (for individuals)
Step 7: Track status under e-Proceedings tab
Step 8: If approved, the Assessing Officer (TDS) will issue the certificate digitally via TRACES
Format of the Certificate
- Contains PAN, financial year, valid period, nature of income, rate of TDS (0% or reduced rate)
- Deductor must validate the certificate on TRACES and deduct tax accordingly
Validity
- The certificate is valid for the entire financial year or up to the date mentioned in the certificate
- Needs to be renewed each year with fresh Form 13 application
Common Mistakes to Avoid
- Applying too late in the financial year
- Underestimating projected income
- Missing deductor details (payer’s PAN)
- Not uploading previous ITR or bank proof
- Incorrect classification of income nature
Example Use Case
- Nisha, a consultant, expects ₹12 lakh income in FY 2024-25 with ₹1.2 lakh standard TDS
- But after deductions under Section 80C and 80D, her net tax is ₹40,000
- She applies for a Lower TDS Certificate under Section 197
- Her clients deduct TDS at 4% instead of 10%
Conclusion
If your TDS rate exceeds your actual tax liability, it makes strategic sense to apply for a Lower or NIL Deduction Certificate. This helps you avoid refund cycles, protect working capital, and reduce tax friction.
Call to Action
Not sure whether you qualify for a Lower or NIL TDS Certificate?
Book a one-on-one advisory session with Anshul Goyal, Chartered Accountant, and we’ll help you estimate tax, draft Form 13, and secure the certificate from the AO.
Visit: https://calendly.com/anshulcpa
Disclaimer
This blog is for general information only. Application under Section 197 requires detailed income projection, accurate deductions, and department approval.
Frequently Asked Questions
1. Who issues the Lower/NIL TDS Certificate?
Jurisdictional Assessing Officer (TDS) after reviewing Form 13.
2. Can I apply mid-year?
Yes, but the earlier the better to avoid excess deduction.
3. Is the certificate valid for all deductors?
No, you must mention deductor PANs while applying.
4. Can NRIs selling property apply?
Yes, especially to avoid 20% TDS under Section 195 on sale proceeds.
5. Do I need a TAN to apply?
No. TAN is required by deductor. PAN is used for Form 13.