Lowering The Burden……….
Pornika Chandhokar owned a commercial property in Chennai, which she acquired as settlement when she divorced her husband.
She let out the property on rent to a chartered accountant firm. Rent from that property fetched around Rs 2.2 lakhs per annum. TDS was deducted at the prescribed rate of 10 percent and she felt that it was too high, considering the increasing inflation crisis, price hikes and so on. So she decided to approach the same firm for advice on what can be done to reduce her tax. Her total income is less than the basic exemption limit specified in the Income Tax Act.
Under the provisions of Income Tax Act, TDS should be deducted at the time of making any payment or debit in the books of accounts, whichever is earlier, and should be deposited to the Department.
Where a taxpayer believes that his/her total income justifies suffering tax at a lower rate, he/she can apply to the jurisdictional assessing officer in prescribed form and manner for obtaining a certificate of withholding tax at a lower rate. This document is called FORM- 13 or lower TDS certificate.
When an assessee is deciding on a ‘No Deduction of Tax’, the certificate will be directly issued to the payer. In case the application is decided in favour of a deduction at lower rate, the certificate will be issued to the applicant.
This certificate can be used in all cases except where payment is made on interest on securities or deposits, for which there is a separate form to be submitted.
The following details are a prerequisite for filling filing in the FORM -13 such as:
- Name and PAN
- Details regarding purpose of payment
- Details of income of past 3 years and projected current year income
- Details of tax paid in past 3 years
- Details of Tax deducted and paid for the current year
The Assessing Officer can issue a certificate for nil tax or withholding of tax at a lower rate. The rate of tax withholding will be determined at the higher of the following:
- At the average rate of tax, i.e. the total tax payable by the assessee on an estimated income without considering already paid advance tax already paid and TDS withheld, as a percentage of the total payment (or)
- At the average of the average rates of tax paid by the assessee in the last three years.
The assessing Office can also reject the application made by the assessee for obtaining lower deduction certificate. The assessee can re-appeal the same order passed by the assessing officer.
So Pornika Chandhokar, after filling the prescribed Form, can submit it to her respective jurisdictional Assessing officer and can obtain FORM13. A certificate will be issued for the same for a prescribed period and she can present the same to the CA firm which is deducting TDS at higher rates.