Application for Lower Deduction of Tax for – Section 197
In some circumstances, a case may arise that TDS is being deducted from the income of the receiver, but his total tax liability computed at the end of the year as per the Income Tax Slab rates is less than the TDS Deducted.
In an example where there is a sale of immovable property –
In case a buyer purchases a property from a resident Indian and the consideration exceeds Rs. 50 lakh, the buyer needs to deduct TDS @ 1% on the consideration paid to the seller. However, as per the provisions of the Income Tax Act, when a buyer purchases a property from a non-resident, he is required to deduct TDS at the higher rate of 20%.
Most of the times, this 20% deduction is a large amount, and when the actual capital gain is computed, the tax liability of the non-resident may not be as much as the 20% deduction on the sale consideration. In this situation, if the TDS is deducted, the non-resident is only left with an option of claiming the refund of the excess tax when he files his income tax returns in the next year. The funds held up till the refund is granted can sometimes create hardship if he needs to purchase another property.
Therefore, the Non Resident has an option to make an application to the Income Tax Department in Form 13 requesting to issue a lower deduction certificate to the buyer to avoid the hardship.
Documents Required to be submitted by the Non-Resident
• Signed Application Form (Form 13)
• Copy of last 3 years Income Tax returns filed in India.
• Computation of Income Statement for the last 3 years.
• Copy of 26AS of last 3 years.
• Statements of your NRO/NRE or any other Bank account maintained in India for last 3 years and till date.
• Copy of PAN Card.
• Copy of all pages of your passport to prove your residential status.
• Schedule showing the days of stay in India during the previous years.
• Computation of Capital Gain.
• Copy of Sale Deed (Purchase Document)
• Copy of Registered Sale Agreement (Proposed Sale)
• Supporting Invoices / Documents in case there is a Cost of Improvement Claimed
• Supporting Sale Agreement / Documents for claim of deduction for re-investment
• TAN of the Buyers
• Latest Guidance Value Extract.
• Any Other Document that the assessing officer may request.