How To Apply For Lower Deduction Certificate Under Section 197

Short : LDC ( Lower deduction certificate) is issued by the income tax department on the basis of application filed by the assessee in form 13 alongwith prescribed documents for certain period, so that the person responsible for paying the income shall, 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.

Certificate for deduction at lower rate.

197. 59a (1) Subject to rules made under sub-section (2A), where, in the case of any income of any person or sum payable to 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 rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 60[194LBA], 194LBB, 194LBC, 194M, 194-O and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate.

(2) Where any such certificate is given, the person responsible for paying the income shall, 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.

(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 sub-section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.

Related Rules and Forms :See rules 28(1), 28AA, 28AB and 29 and Form No. 13. 

Section 28(1) : Application for grant of certificates for deduction of income-tax at any lower rates or no deduction of income-tax. 

Section 28AA : Certificate for deduction at lower rates or no deduction of tax from income other than dividends.

Section 28AB : Certificate of no deduction of tax in case of certain entities. 

Section 29 : Certificate of no deduction of tax or deduction at lower rates from dividends. 

Section 28AA : Documents Required and Procedure

(1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax.

(2) The existing and estimated liability referred to in sub-rule (1) shall be determined by the Assessing Officer after taking into consideration the following:—

(i)tax payable on estimated income of the previous year relevant to the assessment year;

(ii)tax payable on the assessed or returned [or estimated income, as the case may be, of last four] previous years;

(iii)existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957;

(iv)advance tax payment 3[tax deducted at source and tax collected at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28];

(3) The certificate shall be valid for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.