Deduction at a lower rate or non-deduction of tax

Section 197 enables a tax payer to make an application to his Assessing Officer for deduction of tax at a lower rate or non deduction of tax. The application has to be made in Form No.13 (vide Rule 28(1)). If the Assessing Officer is satisfied that the total income of a tax payer justifies the deduction of income tax at any lower rate or no deduction of income tax, he may issue a certificate in Form No. 15AA (relevant Rule 28AA) providing for deduction of tax at lower rate or no deduction of tax.

The certificate is valid only for the assessment year as specified therein. On expiry of the validity period, a fresh application may be made. A certificate is issued directly to the person responsible for deducting tax/DDO with a copy to the applicant. In absence of such a certificate from the employee, the employer should deduct income tax on salary payable at normal rates.