What is Form 13?
The deductor/payer deducts tax at the time of making payment to the payee. And the deductee/payee claims the same at the time of filing ITR as per Form 26AS.
Sometimes the total tax liability of a payee is less than TDS deducted on his income. And he does not wish to wait till the end of the year to claim a refund of tax deducted. In these cases, under section 197 payee can make an application for Non-Deduction/ Lower Deduction of tax in Form 13 to his Assessing Officer (AO). Form 13 is required to be filed separately for each financial year. And the same needs to be given to the deductor for lower/Non-deduction of TDS/TCS.
Let’s take an example to understand better:
Ajay is a freelancer and has earned income from a project with a company. The company paid fees of Rs. 5,00,000. During the FY 2019-20, he has no other income. The Company will deduct TDS at the rate of 10% while making payment of fees. Here his total tax liability is zero, since rebate of Rs. 12,500 is available on income up to Rs. 5,00,000 in FY 2019-20. Hence Ajay can make an application for lower/Non-Deduction of TDS in Form 13.
Who can make an application in Form 13?
A payee/taxpayer can file an application to the Assessing Officer(AO) to give a certificate for Non/Lower deduction of TDS/TCS. An application can be made for the following incomes:
- Salary Income
- Dividend Income
- Interest Income
- Contactors Income
- Insurance Commission
- Brokerage or Commission
- Lottery Prize/ Commission/ Remuneration
- Rent Income
- Professional/ Technical Fees
- NRI Income u/s 195
- Compensation on acquisition of Immovable Property
- Income from units of investment fund
- Income from investment in securitization trust
Note: Form 15G/15H is filed for any interest on FD or interest on other than interest on securities is received.
When to make an application in Form 13?
The payee can make an application any time during the financial year. However, it is a good practice to make an application at the beginning of the year for income earned throughout the year.
What are the details required for filing Form 13?
Following are the details required:
- Name and PAN of a taxpayer.
- The Nature of payment received.
- Details of income for the last 3 years.
- Details of payment of tax for the last 3 years.
- Tax deducted/ paid for the current year.
- Projected current year’s income.
- Details of exempt income if any for the current year.
How to make an application in Form 13?
The Payee can make an application in Form 13 to AO in the following manner:
- Online: An application can be made online by the payee. It is advised that payee/ taxpayer files complete and correct details required for processing the application. Once an application is processed and AO is satisfied with the application he will issue the certificate. This Certificate is only valid for the specified deductors and hence only those deductors can deduct tax at a lower rate and not all the deductors.
- Manually: An application can be made manually to the AO where online application is not accepted. You can download the form 13 from here.
Lower Deductions/No deductions u/s 197 certificates are given to the deductor by the deductee. It can be obtained by the Deductee from the Assessing Officer (AO) after submitting relevant information in Form 13.
In case the tax isn’t deducted by the employer then the actual tax paid might not be sufficient to cover your full tax liability. And a penalty under section 221 shall be levied.
The deductor needs to deduct TDS at the applicable rate. However, if certificate for lower/no deduction of TDS is given by the deductee then it should be deducted at lower rate.