Form 13 and Section 197 - How to Get a Lower or Nil TDS Deduction Certificate

TDS is a blunt instrument. It is deducted on gross receipts at a flat rate, without any idea of your actual expenses, deductions, or losses. A freelancer billing ₹40 lakh a year has 10% withheld under Section 194J even if their real tax liability works out to 4% of receipts. An NRI selling a flat has TDS deducted on the entire sale price, not on the capital gain.

The money is not lost - you claim it back as a refund. But you claim it back a year later, after filing your return, after processing, after the refund is released. For anyone running a business or planning a large transaction, that is working capital sitting with the government for twelve to eighteen months.

Section 197 exists precisely for this. It lets you apply in Form 13 for a certificate directing your payers to deduct TDS at a lower rate, or not at all. This guide covers who qualifies, how the application works, and the timing rules that most people discover too late.

What Section 197 Actually Does

Section 197 allows the Assessing Officer to issue a certificate authorising a lower rate of TDS, or nil TDS, when your total estimated income for the year justifies it.

The certificate is issued to you but names specific deductors. Once you hand it to a payer, they deduct at the certified rate instead of the statutory rate, up to the certified amount.

This is different from the self-declaration route. Form 15G and Form 15H are declarations you sign yourself under Section 197A, available only to residents whose final tax liability is nil, and only on a limited list of incomes such as interest and dividends. Form 13 is an application to the department, it can produce a lower rate rather than only nil, it is available to non-residents, and it covers far more payment types.

Which Payments Are Covered

A Section 197 certificate can be obtained for TDS under these sections:

• 192 - salary
• 193 - interest on securities
• 194 - dividends
• 194A - interest other than on securities (bank FDs, bonds, loans)
• 194C - payments to contractors
• 194D - insurance commission
• 194G - commission on lottery tickets
• 194H - commission or brokerage
• 194-I - rent
• 194J - professional or technical fees
• 194K - income from mutual fund units
• 194LA - compensation on compulsory acquisition
• 194LBA / 194LBB / 194LBC - business trust, investment fund and securitisation trust income
• 194M - certain payments by individuals and HUFs
• 194-O - e-commerce operator payments
• 194Q - purchase of goods
• 195 - any sum payable to a non-resident

The important exclusions

Section 194-IA is not on the list. If you are a resident selling property above ₹50 lakh, the buyer must deduct 1% TDS on the sale consideration and no certificate can reduce it. Section 194-IB (rent paid by individuals not liable to tax audit) is also excluded.

A non-resident seller is in a different position entirely - their buyer deducts under Section 195, which is covered, which is exactly why Form 13 matters so much in NRI property sales.

Who Should Actually Apply

NRIs selling property in India

This is the strongest case for Form 13. Under Section 195, TDS is deducted on the entire sale consideration, not on the gain.

Consider an NRI selling a Bengaluru flat for ₹1.4 crore that was bought in 2016 for ₹85 lakh. The long-term capital gain is roughly ₹55 lakh, taxed at 12.5% without indexation, giving a liability of about ₹6.9 lakh plus surcharge and cess.

Without a certificate, the buyer withholds 12.5% plus surcharge and cess on ₹1.4 crore - close to ₹18.2 lakh. That is over ₹11 lakh of the seller's money parked with the department until the return is filed and the refund arrives. With a Section 197 certificate computing TDS on the actual gain, the deduction drops to roughly the real liability.

Freelancers and professionals with high expenses

Section 194J deducts 10% on gross professional fees. A consultant billing ₹60 lakh with ₹30 lakh of genuine business expenses has TDS of ₹6 lakh against a real liability far below that. A certificate at, say, 3% aligns the withholding with the actual tax.

Landlords with heavy interest deductions

Rent above ₹6,00,000 a year attracts 10% TDS under Section 194-I from AY 2026-27. If the property carries a large home loan, the interest deduction under Section 24(b) can wipe out most of the taxable rental income while TDS still runs on gross rent.

Businesses and sellers under 194Q

Buyers deduct 0.1% on purchases above ₹50 lakh. On thin margins, that withholding can exceed the entire year's tax.

Anyone carrying forward losses

If you have brought-forward business or capital losses that will absorb this year's income, TDS at statutory rates is pure blocked cash.

How to File Form 13

The entire application is online on the TRACES portal (the TDS reconciliation system), not on the main income tax e-filing portal.

Step 1 - Register on TRACES as a taxpayer. Use your PAN, date of birth, and details from a previously filed return or a deducted TDS entry.

Step 2 - Open "Request for Form 13" under the Statements/Forms menu. Choose whether the application is under Section 197 (residents and non-residents, TDS) or Section 206C(9) (lower collection of TCS).

Step 3 - Fill in the estimated income computation. You declare estimated income for the current financial year under each head, the deductions claimed, and the resulting tax liability. This is the core of the application - the officer is checking whether your proposed rate is defensible.

Step 4 - Enter the details of each deductor. You need the TAN of every payer for whom you want the certificate, along with the estimated amount of payment from each. A certificate cannot be used by a deductor whose TAN is not listed, so collect TANs before you start.

Step 5 - Attach supporting documents. Typically: returns and computations for the last three to four years, current-year financials or projections, the sale agreement and cost documents for a property transaction, and proof of expenses or losses being claimed.

Step 6 - Sign and submit using a digital signature or electronic verification code, then track the request number on TRACES.

The Assessing Officer may raise queries before deciding. Applications are generally expected to be disposed of within about a month of a complete submission, but a well-documented file moves faster than a thin one. If the certificate is issued, both you and each named deductor can download it from TRACES.

The Timing Rules That Cost People Money

A certificate is never retrospective. It takes effect from the date of issue and runs at most to 31 March of that financial year. TDS already deducted before the certificate arrives stays deducted - your only route for that is a refund in your return.

This is why the application should go in early in the financial year, or, for a one-off transaction, well before the payment date. For a property sale, apply as soon as the agreement is signed and before any instalment is released.

A fresh application is needed every financial year. Certificates do not roll over.

The certificate can specify a ceiling. Many certificates cap the total amount on which the lower rate applies. Once payments cross that ceiling, the deductor reverts to the full statutory rate, so the estimated amounts you declare per deductor should be realistic rather than conservative.

No PAN means no relief. Under Section 206AA, TDS without a valid PAN is deducted at 20% (or the higher applicable rate), and a Section 197 certificate cannot override that. Make sure your PAN is active and linked to Aadhaar before applying - an inoperative PAN will sink the application.

One piece of good news: Sections 206AB and 206CCA, which imposed higher TDS and TCS on people who had not filed returns, were removed with effect from 1 April 2025. Deductors no longer need to run that check, which removes a common reason for over-deduction.

When Form 13 Is Not Worth It

Be honest about the effort. The application takes documentation, follow-up, and often a query response.

If the excess TDS is a modest amount, filing your return promptly and tracking the refund is simpler. The rough threshold is whether the blocked amount is material to your cash flow - a ₹40,000 excess is a nuisance, a ₹10 lakh excess on a property sale is a financing problem.

Also remember that under-declaring your estimated income to obtain a low certificate is not a clever move. The department reconciles the certificate against your filed return, and a large gap invites scrutiny of exactly the transaction you were trying to smooth.

Claiming the Credit at Filing Time

TDS deducted at the certified lower rate appears in Form 26AS and your AIS like any other TDS entry, tagged against the certificate number. When you file, the credit is claimed the usual way in the TDS schedule of your return. 49Tax pulls these entries straight from your Form 26AS and AIS, so a lower-rate deduction does not need any special handling at filing time - it simply shows a smaller credit against a matching liability.

Keep the certificate itself on file. If a deductor later reports the deduction incorrectly, the certificate is your evidence of the rate that was authorised.

The Takeaway

If you expect your actual tax liability to be meaningfully lower than the TDS that will be withheld this year - because of business expenses, home loan interest, carried-forward losses, or a capital gain that is a fraction of the sale price - file Form 13 on TRACES before the payments start. The certificate cannot reach backwards, so the single biggest determinant of how much cash you free up is how early you apply. For a property sale by an NRI, treat the application as part of the transaction timeline, not as paperwork to handle afterwards.