Lower Tax Deduction Certificate (LTDC), issued under Section 197, allows taxpayers to receive income with reduced or no Tax Deducted at Source (TDS). This certificate is beneficial for individuals or entities whose estimated total income for the financial year is lower than the income on which TDS is being deducted. It ensures that TDS is deducted at a rate that aligns with the taxpayer's actual tax liability.

Eligible applicants include

• Non-residents receiving payments from India (if eligible under Double Taxation Avoidance Agreement provisions).
• Individuals, firms, and companies whose estimated total income is lower than the applicable TDS rate
• Freelancers and consultants who provide professional services and expect a lower taxable income.
• Companies with business losses or exemptions.

Application Process

• Register on the TRACES Portal
• Submit Form 13 by filling in the necessary details
• Upload Supporting Documents
• Submit and verify the application
• The AO will process the application and, if satisfied, issue the LTDC specifying the reduced TDS rate.

Validity and Renewal

• Validity: The LTDC is typically valid for the financial year in which it is issued, from the date of issuance until the end of that financial year (March 31st), unless cancelled earlier by the AO.
• Renewal: A new application must be submitted for each financial year to continue availing the benefits of reduced or nil TDS deductions.

Benefits of Obtaining an LTDC

• Improved Cash Flow: By reducing or eliminating TDS deductions, taxpayers can maintain better liquidity.
• Simplified Tax Filing: Avoid the need to claim TDS refunds during the income tax return filing process.
• Accurate Tax Deduction: Ensures that TDS is deducted in alignment with the taxpayer's actual tax liability.

Documents to be Submitted with Form 13

The following documents need to be submitted with Form 13:

• Signed Form 13
• Copies of return of income along with enclosures and acknowledgement for the previous 3 financial years
• Copies of assessment orders for the previous 3 financial years
• In case of the assessee having business or professional income, copies of financial statements along with audit reports if any for the previous 3 financial years
• Projected profit and loss account for the current financial year
• Computation of income statement for previous 3 financial years and estimated computation for the current financial year
• Copy of PAN card
• Tax Deduction Account Number of all parties responsible for paying you
• E-TDS return acknowledgement for the previous 2 financial years
• Estimated income during financial year
• Any other documents depending on the nature of the income
• TDS default earlier

Once the application is complete in all aspects and is submitted to the jurisdictional assessing officer (TDS), it shall be disposed of within 30 days from the end of the month in which it is received. The assessing Officer will review the documents/information submitted and may ask for further queries and documents before issuing the certificate or rejecting the application.