Lower TDS Certificate Under Income Tax Act 2025: Section 398 Guide

Lower TDS Certificate Under explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

1. When is a Lower TDS Certificate Needed?

A lower TDS certificate is useful when:

• Your actual income tax liability is lower than the TDS that would otherwise be deducted
• You have significant business losses, depreciation, or deductions that reduce actual liability
• You are a non-resident with DTAA benefits that reduce withholding below domestic rates
• You want to avoid blocking large amounts in TDS refunds
• You are a charitable trust or exempt entity whose income is otherwise exempt

2. How to Apply for Lower TDS Certificate

1. Login to the Income Tax Portal with your PAN credentials
2. Go to "Services" and select "Application for Lower/No Deduction" (Form 13 online)
3. Fill Form 13 — providing income projections, past year ITR details, TDS deductions expected, and justification for lower rate
4. Submit digitally — the application is processed by the Centralised Processing Cell
5. If approved: Certificate issued specifying lower rate (or nil rate), validity period (usually for one Tax Year), and applicable deductors

3. Key Information Required in Form 13

• Nature of income on which lower TDS is requested
• Estimated income for the Tax Year
• Estimated tax liability after all deductions
• TDS already deducted (as reflected in Form 26AS/AIS)
• Previous 3 years ITR data and TDS history
• Justification for claiming lower rate (losses, exemptions, DTAA, etc.)

4. Validity and Scope of Certificate

The lower TDS certificate specifies:

• The deductor name(s) who must apply the lower rate
• The TDS rate at which deduction should be made
• The Tax Year of validity (usually one year)
• Maximum income threshold up to which the rate applies

The certificate is issued with conditions — if income exceeds the threshold specified, the regular TDS rate applies to the excess.

5. For Non-Residents: DTAA Lower Rate

Non-residents can apply for a nil TDS certificate or lower rate certificate under Section 398 based on DTAA provisions. Alternatively, they can provide a TRC (Tax Residency Certificate) + Form 10F to the Indian payer directly, allowing the payer to apply the DTAA rate without obtaining a formal certificate from the AO.

6. Why TaxClue

A lower TDS certificate improves cash flow by ensuring you do not over-pay TDS and wait months for refunds. TaxClue prepares and files Form 13 applications with supporting documentation for maximum success. Contact us for lower TDS certificate advisory and filing under ITA 2025.