Section 197 lets a recipient of income apply to the assessing officer for a certificate authorising TDS at a lower rate or nil, where the normal rate would exceed the tax actually payable. The application is Form 13, filed online through the TRACES portal. The officer computes the rate under Rule 28AA from your estimated income and past assessments, and issues a certificate naming specific deductors. It is valid only until the end of that financial year and never applies retrospectively — TDS already deducted before the certificate is issued cannot be undone, only reclaimed as a refund.
A Section 197 certificate takes effect from the date it is issued. Tax already deducted in the months before that stays deducted, and the only route back is a refund when you file your return. For income that starts in April, the application should go in before the financial year begins or in its first weeks.
Who Actually Benefits from Form 13
The certificate is worth pursuing whenever gross-receipt-based TDS bears no relation to your real margin or liability. Typical cases:
| Situation | Why TDS overshoots |
|---|---|
| NRI selling Indian property | TDS under Sec 195 applies to the whole sale value, while tax is due only on the capital gain |
| Loss-making or thin-margin company | TDS on gross contract receipts under 194C, though taxable profit is small or negative |
| Professional with heavy expenses | 10% under 194J on gross fees, when net taxable income is a fraction of that |
| Business with large carried-forward losses | No tax payable at all, yet TDS continues on every receipt |
| Entity claiming a treaty rate | DTAA rate is lower than the domestic Section 195 rate |
| Landlord below the taxable threshold | TDS under 194-I on rent although total income falls under the basic exemption |
Where the recipient is a resident individual whose total income is below the taxable limit, the far simpler route is a self-declaration in Form 15G or 15H under Section 197A — no assessing officer involved.
Use Form 13 (Sec 197) when
- You are a company, firm, LLP or NRI
- TDS clearly exceeds your estimated liability
- You want a specific reduced rate certified in advance
Use Form 15G / 15H (Sec 197A) when
- You are a resident individual or HUF
- Total income is below the basic exemption limit
- The income is interest, rent or similar covered receipts
How to File Form 13 on TRACES
What to attach
- Income-tax returns and computations for the last three to four years
- Audited financial statements for the same period, where applicable
- A projected computation of income for the current financial year
- Copies of contracts, rent agreements or sale agreements generating the receipts
- Details of every deductor with their TAN, and the estimated amount from each
- For treaty claims: the Tax Residency Certificate and Form 10F
A Section 197 certificate is issued deductor by deductor, quoting each TAN and a ceiling amount. A deductor not named on it must still deduct at the normal rate. If you take on a new client or buyer mid-year, you need the certificate amended to add their TAN — so list every likely payer in the original application.
Selling property as an NRI and facing TDS on the full sale value?
Ask our tax desk →How the Officer Sets the Rate (Rule 28AA)
Rule 28AA requires the assessing officer to work out the rate from your existing and estimated total income, not from a formula you propose. The officer weighs:
- Tax payable on the estimated income of the current year
- Assessed, returned or estimated income of the last four previous years
- Existing liabilities under the Income-tax Act and the Wealth-tax Act
- Advance tax already paid, TDS and TCS already deducted or collected for the year
The resulting rate is the average rate of tax on the estimated income, and it may well be a reduced percentage rather than nil. A nil certificate is granted only where the officer accepts that no tax is likely to be payable at all.
Validity Traps
- It expires with the financial year. A fresh Form 13 is needed each year — there is no automatic renewal.
- It is prospective only. Nothing deducted before the issue date can be reversed at source.
- It carries a monetary ceiling. Once payments to you from a named deductor exceed the amount stated, the normal rate applies to the excess.
- It can be cancelled. If the estimate turns out to be wrong, the officer may cancel or amend it mid-year.
- Give a copy to every deductor. A deductor who has not seen the certificate will, quite correctly, deduct at the full rate.
Section 206AB and 206CCA, which imposed higher TDS and TCS rates on people who had not filed their returns, were omitted with effect from 1 April 2025 by the Finance Act 2025. Deductors no longer need to run the non-filer check, and that particular reason for seeking a lower-deduction certificate has fallen away.