This presentation is aimed to give you an insight on how you can obtain a lower withholding tax certificate in India. It further emphasizes in detail the criteria for the provision of the certificate, the important documentation required for the same and the practical implications which the certificate carries. To put things in context, a lower withholding tax certificate helps companies plan their project finances and working capitals better because high tax costs that arise during the execution of those projects and delayed reimbursements from the tax department tend to disrupt the project’s financial plan.

1. Lower Withholding Tax Certificate In India
Provisions, Procedure, and Practical Aspects

2. The application for obtaining a lower/nil withholding tax certificate is to
be made by the taxpayer electronically in Form 13;
The application is to be made in accordance to the procedures, formats
and standards for ensuring secure capture and transmission of data
and uploading of documents to be laid down by Principal Director General
of Income Tax (Systems);
No certificate under Section 197 of the Act is granted unless the
application contains Permanent Account Number (‘PAN’) of the applicant;
All certificates are mandatorily to be generated and issued by the
concerned assessing officer through ITD system only, i.e., computer
system of the department. Issue of manual certificate under section 197
is not permitted w.e.f FY 2010-11;
FEATURES

3. The timeline prescribed for the disposal of application for nil/lower
withholding tax certificate is 30 days from the end of the month in which
the application is submitted with the concerned authorities;
Once the certificate is issued, the copy of the certificate must be provided
to the deductor and the deduction of tax shall be made at the rate
mentioned in the certificate;
The lower withholding tax certificate is valid from the date on which it is
issued till the expiry of the validity of certificate or cancellation of the same
by the concerned assessing officer, whichever is earlier;
Generally, a certificate is valid from the date of its issuance till the last date
of the FY during which it is issued. For example, a certificate issued on 1st
July 2018 shall remain valid till 31st March 2019, unless cancelled by AO;
Certificate issued by the concerned TDS officer can be generated
by the deductor and the tax payer through their Traces login.
FEATURES

4. Covering letter explaining the nature of business of the applicant and the
reason for obtaining lower withholding certificate;
Details of the deductor with their correct address & TAN;
Form 13 (filed electronically);
Details of revenue to be earned during the year under consideration, along
with the relevant contracts;
Projected financial statements & computation of income, and tax payable
thereon;
Documents required for filing application under section 197/195(2)

5. Documents required for filing application under section 197/195(2)
Audited financial statements along with tax audit report for four preceding
years;
Provisional financial statements for the immediately preceding Financial
Year;
Income tax return filed for four preceding years;
Assessment orders of preceding four years (if any)
Notarized copy of affidavit for litigation status till the date of making the
application;
Notarized copy of Power of Attorney in favour of the Authorized
Representative

6. Procedure for filing the application for a Lower Withholding Tax Certificate
STEP 1
Application in Form 13 along with annexures, submit
electronically through Traces portal with the
concerned TDS Assessing Officer (‘AO’)
STEP 2
On satisfaction, AO forwards the file to the Joint
Commissioner of Income Tax/Additional
Commissioner of Income Tax (‘JCIT’/’ADIT’) for
approval
STEP 3
Approval of Commissioner of Income Tax (‘CIT’) is
required in case the tax foregone amount exceeds
INR 50/10 lakhs (as the case may be) (if applicable)

7. Factor Section 195(2) Section 197
Applicant Payer
Payee
(Resident or Non-Resident)
Purpose
Application for lower/nil withholding
tax certificate
(To determine appropriate sum
chargeable to tax and liability to
withhold tax)
Application for lower/nil
withholding tax certificate
Application
Form
No prescribed form
(Practically, Form 13)
Form 13
Jurisdictional
Officer
Application to be filed by payer
before the jurisdictional officer of
payee
Payee’s jurisdictional officer
Appeal
An appeal against certificate issued
under this section can be filed u/s
248 of the Act
Order not appealable – Writ
Petition need to be filed before
High Court

8. To read about the mentioned provisions in detail, please refer to the
following links:
PROVISIONS GOVERINING LOWER WITHHOLDING TAX CERTIFICATE
Section 197 of the Income Tax Act,1961
Section 195(2) of the Income Tax Act,1961

9. Appreciate your time!
KUNAL ARORA
CONSULTANT | TAX AND REGULATORY SERVICES
kunal.arora@coinmen.in | +91 9582728298
A-22, II Floor, Green Park Main, Aurobindo Marg, New Delhi 110016, India
+91 – 11 – 4016 0160 | www.coinmen.in