Who applies for a Section 197 certificate, the payer or the payee?

The payee, meaning the person whose income is being subjected to TDS. They file Form 13 on TRACES with supporting computations. The deductor's role begins only once the certificate is issued, at which point they deduct at the rate it specifies for payments to that deductee.

Can a Section 197 certificate recover TDS already deducted?

No. The certificate operates prospectively from the date it is issued. Anything deducted before that has to be claimed as a refund by filing your return. This is why the application is worth making at the start of the financial year rather than when the deductions start to hurt.

How is Section 197 different from Form 15G or 15H?

Form 15G and 15H are self-declarations a resident files directly with the payer, stating that their income is below the taxable limit, and they need no approval from the department. A Section 197 certificate is issued by the Assessing Officer after examining your estimated liability, covers a much wider range of payments and rates, and is available to non-residents, who cannot use 15G or 15H at all.

How long does a Section 197 certificate remain valid?

It is issued for the financial year and typically specifies both the deductors it covers and a ceiling on the amount of income it applies to. It lapses at the end of the year, so a fresh application is needed annually, and payments beyond the specified threshold revert to the ordinary rate.

TDS & TCS

Section 197Certificate for Lower or Nil Rate of TDS

Section 197 lets a taxpayer whose final liability will be lower than the tax being deducted apply to the Assessing Officer for a certificate authorising deduction at a reduced rate or none at all.

Income-tax Act, 1961Reviewed 19 August 2026

In short

The application is made by the deductee on Form 13 through the TRACES portal, not by the deductor.
It is prospective. A certificate cannot recover tax already deducted, so applying early in the financial year is the whole game.
The certificate names a specific deductor and a specific threshold amount. It is not a general exemption you can hand to anyone who pays you.
It is the standard remedy where TDS is charged on gross consideration but tax is genuinely due on a much smaller net figure, which is why it dominates NRI property sales.
Without it, the only route to your money is a refund after filing the return, which can mean waiting more than a year.

Who it applies to

Any deductee whose estimated total tax liability is lower than the tax that would be deducted at the statutory rate
NRIs selling property in India, where TDS under Section 195 is computed on sale consideration rather than on the actual capital gain
Businesses running thin margins or carrying losses, where TDS on gross receipts far exceeds tax on net profit
Professionals and contractors with large gross billings and substantial deductible costs

How it works

TDS is designed as a rough approximation collected at source, and rough approximations overshoot. Section 197 is the Act's own correction mechanism for the cases where the overshoot is large enough to matter, letting the deductee ask the Assessing Officer to authorise deduction at a lower rate, or none, on the basis of their estimated actual liability for the year.

The clearest case is an NRI selling Indian property. TDS under Section 195 attaches to the sale consideration, not to the gain, so a seller who bought years ago and is selling at a modest real profit can find a very large sum deducted against a comparatively small actual capital gains liability. Without a Section 197 certificate, that difference sits with the department until the return is filed and processed. With one, the buyer deducts only what the certificate specifies.

The same logic covers resident cases that get less attention: a contractor with high gross billings and thin net margins, a business carrying forward losses that will absorb the year's income entirely, or a professional whose deductible expenses swallow most of their receipts. In each, tax deducted on gross payments bears no resemblance to tax finally payable.

Two procedural facts decide whether the section is any use to you. First, the application is filed by the person receiving the income, on Form 13 through TRACES, supported by computations, past returns, and the projected income for the year. Second, and more important, a certificate has no retrospective effect. Tax already deducted before it was issued stays deducted, and the only route to it is the ordinary refund process. Applications made in the closing months of a financial year therefore recover very little, which is why practitioners treat this as an April or May task.

The certificate itself is narrow by design. It is issued for named deductors, for specified sections, valid for the financial year, and usually capped at a threshold amount of income. Exceeding the threshold or receiving payments from a deductor not named on it puts you back on the normal rate. A related but separate route exists for residents with no liability at all, through the self-declarations on Form 15G and Form 15H, which do not require the Assessing Officer's approval.

Also searched as: lower TDS certificate, nil TDS certificate, section 197 certificate, sec 197 of income tax act, form 13 application.

Frequently asked questions

Worked detail on this section

Current rates, limits, and step-by-step process live in these guides, which are kept updated as the law moves.

Lower or Nil TDS Deduction Certificate Under Section 197: When and How to Apply

Standard TDS rates don't know your actual tax position. Here's how a Section 197 certificate fixes that upfront, instead of leaving your money stuck till refund season.

NRI Selling Property in India: How Section 195 TDS Works and How to Lower It

Selling property in India as an NRI triggers a TDS deduction that can run far higher than your actual tax bill, unless you plan for it in advance.

Form 26AS and AIS: How to Reconcile Your Tax Credits Before Filing

Form 26AS tracks tax already paid; AIS tracks almost everything else. A practical walkthrough of reconciling both before a mismatch turns into a notice.

Forms involved

Form 13 Form 15G Form 15H Form 27Q Form 26AS

Related sections

195 TDS on Payments to Non-ResidentsSection 195 requires tax to be deducted from any sum paid to a non-resident that is chargeable to tax in India, at rates set by the Act or the applicable tax treaty, whichever is more favourable.192 TDS on SalarySection 192 requires an employer to deduct tax from salary at the employee's own average rate, spread across the year, and to issue Form 16 recording what was deducted.194A TDS on Interest Other Than SecuritiesSection 194A governs tax deducted on interest paid by banks, post offices, and others, and is the reason tax appears against fixed deposit interest before it reaches your account.

Primary sources

Disclaimer

This page explains what a statutory provision does in general terms. It is not a substitute for the bare act, and it is not professional tax or legal advice. Rates, thresholds, and limits change with each Finance Act, and applicability turns on facts specific to you. Confirm anything that affects a real filing with a qualified Chartered Accountant.

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