What is a Nil TDS Certificate?

A Nil TDS Certificate is an official document issued by the Income Tax Department, authorizing the payer to either:

• Deduct TDS at a lower rate than prescribed, or
• Not deduct TDS at all on specified payments.

It ensures that individuals or businesses whose estimated total income warrants no or minimal tax are not subject to unnecessary TDS deductions.

Who Can Apply for Nil TDS Certificate?

You can apply for a Nil TDS Certificate if:

• Your total income is below taxable limits after claiming eligible deductions.
• Your tax liability is lower than the normal TDS rate applicable.
• You are a salaried employee, freelancer, consultant, professional, contractor, or business entity receiving specific payments like interest, rent, commission, or professional fees.

Some common cases where Nil/Lower TDS Certificate is required:

• Contractors/sub-contractors receiving large project payments.
• Professionals like consultants, architects, CAs with low effective tax.
• Companies earning interest income from banks or NBFCs.
• Rent receivers where effective tax is low after deductions.
• NBFCs or fintech companies receiving loan repayments.

Legal Provision: Section 197 of Income Tax Act

Section 197 empowers taxpayers to apply to the Assessing Officer for issuance of a certificate authorizing:

• Deduction of TDS at a lower rate, or
• Deduction of TDS at NIL rate.

The application must be made using Form 13 through the TRACES Portal (online).

Documents Required to Apply for Nil TDS Certificate

Before applying, gather the following documents:

• PAN Card (mandatory)
• Computation of Total Income (current and previous year)
• Audited Financial Statements (if applicable)
• Tax Audit Report (if applicable)
• Form 26AS (Tax Credit Statement)
• Income Tax Return copies (for last 2-3 years)
• Projected Income Statement (for the financial year)
• Details of the transaction for which Nil TDS is sought (agreement copies if needed)
• Details of deductors/payers (Name, PAN, TAN, address)
• Proof of any exemption claims (like 80G donations, 10(23C) exemptions for trusts)

Step-by-Step Process to Apply for Nil TDS Certificate (Online)

Step 1: Register/Log in to TRACES Portal

• Visit TRACES website.
• Log in using your PAN, password, and captcha or complete registration first.

Step 2: Navigate to Form 13 Application

• Go to “Statements/Forms” section after logging in.
• Click on “Request for Form 13”.

Step 3: Fill Form 13 Details

• Provide applicant details: Name, PAN, Address, Contact details.
• Mention nature of income: rent, commission, interest, etc.
• Fill estimated income and previous financial year data.
• Provide deductor details: Name, PAN, TAN, amount payable.
• Justify your Nil/Lower TDS request.

Step 4: Attach Supporting Documents

• Upload past 2-3 years’ ITRs, financials, Form 26AS, computation sheets.
• Attach agreements or contracts if applicable.
• Ensure documents are self-attested and clear.

Step 5: Submit and E-Verify

• Review the form thoroughly before submission.
• Submit the form online.
• Complete e-verification using Aadhaar OTP, Net Banking, or DSC.

Step 6: Track Application Status

• Note the Acknowledgment Number after submission.
• Track status under “View Submitted Requests” on TRACES.

Assessment and Issuance of Nil TDS Certificate

Once the application is submitted:

• The Assessing Officer (AO) scrutinizes the application.
• AO may issue a clarification notice or request additional documents.
• If satisfied, AO issues a Nil TDS Certificate mentioning all details.

The certificate is issued electronically and can be downloaded from the TRACES portal.

Important Points to Keep in Mind

• Apply well in advance before starting receipt of payments.
• Nil/Lower TDS Certificates are generally valid for the Financial Year.
• Separate certificates may be required for different income sources or deductors.
• Use Aadhaar OTP if you do not have a Digital Signature.
• Respond promptly if the Assessing Officer asks for additional information.

What Happens if You Do Not Apply?

• TDS will be deducted at the standard prescribed rate.
• You may have to wait for refund processing after filing your ITR.
• Excess deduction can affect your cash flow and working capital.

Thus, proactively applying for a Nil TDS Certificate is a smart move for better cash management.

FAQs on Nil TDS Certificate Application

1. Is Form 13 mandatory for Nil TDS?

Yes, Form 13 is mandatory for applying for Nil/Lower TDS deduction under Section 197.

2. Can individuals apply for Nil TDS Certificate?

Yes, individuals, firms, LLPs, companies, and trusts can apply if eligible.

3. How much time does it take to get Nil TDS Certificate?

It generally takes 15-30 working days depending on the Assessing Officer’s scrutiny and completeness of documents.

4. Is a separate application required for each deductor?

Yes, if payments are being received from multiple deductors, separate details need to be provided.

5. Can Nil TDS Certificate be revised?

No formal revision is allowed. If any material changes occur, a fresh application may be required.

Conclusion

Applying for a Nil TDS Certificate is a strategic and practical approach to avoid unnecessary tax deductions and refund delays.

By following the proper procedure, filing a complete Form 13 application on the TRACES portal, and submitting all necessary documents, you can easily secure a Nil or Lower TDS Deduction Certificate and maintain smooth cash flows.

If you need professional help with filing or faster processing of Nil TDS Certificates, consulting a tax expert or Chartered Accountant is always recommended.