Procedure for Lower TDS u/r 28AA streamlined; Consumption Statement to be available online to deductors

[Vivek Jalan]

For grant of certificate for TDS at lower rate or no TDS u/s 197(1) of the Income-tax Act, the Proviso to Rule 28AA (4) was notified vide Notification No. 74/2018 dated 25-10-2018, as under-

Provided that where the number of persons responsible for deducting the tax is likely to exceed one hundred and the details of such persons are not available at the time of making application with the person making such application, the certificate for deduction of tax at lower rate may be issued to the person who made an application for issue of such certificate, authorising him to receive income or sum after deduction of tax at lower rate.

Now vide Notification No. 2/2023 an SOP has been notified and this will come as a big relief for the taxpayers who apply for low or no TDS certificates where the details of the deductor are not available at the time of making application and there are more than 100 deductors. Rule 28AA is applicable for TDS under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, [194LBA] 194LBB, 194LBC, 194M, 194-O and 195. However, it is important to note that this notification is other than those deductees which are trusts, etc and which fall under Rule 28AB.

The Most important feature is the “Consumption/ Tracking of Certificate”. The certificate reported by deductors who have received certificate in their TDS statements, will be consumed on the basis of processing of TDS statements as per FIFO principle. The deductor should verify/ track consumption status of the certificate before furnishing certificate details in TDS statement(s) through the path ‘Deductor login->Statement / Payments-> History-> Validate Lower Deduction Certificate u/s 197/ 195(3)/ 195(2)’ to avoid any defaults.

The entire procedure is as follows –

a. An application in Form 13 with Annexure II shall be made by the taxpayer/ Deductee on the TRACES. The applicant can track the status of the application through option ‘Track Request for Form13/ 15C/15D' under the tab ‘Statements/Forms’.

b. The application will be assigned to the TDS AO or DCIT/ACIT as per threshold’s specified in the notification.

c. Once the application in form 13 has been successfully submitted, the data like processed data of Income Tax Returns of previous 4 financial years, PAN Demand, Orders/returns/Audit report of last 4 years, will be obtained by CPCTDS.

d. The AO shall process the application by scrutinizing the data along with Information about the history of previous TAN less certificate issued to the applicant where the number of deductors who consumed the said certificate did not reach up to 100 during the last financial year, if available. AO can also seek clarifications online which will be reflected on the TRACES login of the applicant. After approval/rejection of the application, as the case may be, it will be forwarded to the supervisory authority, i.e., the Range Head or Range Head & CIT.

e. Thereafter, the Range head shall process the application through TRACES-AO Portal. He will also see all data along with Recommendation of the TDS AO. He can seek and get further clarifications.

f. Based upon the revenue forgone, the application will be marked to the CIT who shall also take into consideration Recommendation of the Range Head. He can seek and get further clarifications.

g. After a final decision in the application has been taken by the CIT, the application will be marked back electronically on TRACES-AO Portal to the AO for issuance of the certificate or rejection of the application.