Practical Issues and Challenges Faced

  • Limitations with respect to income submitted:

The benefit can be claimed only upto the amount mentioned in the certificate. Where there is an increase in the value of transactions during the year, the deductor will have to first apply for modification and only then utilise the benefit for additional transactions.

  • Time Consuming:

The said process of application is considered to be a time consuming one. On an average the whole process takes around 25-30 days. Till then the deductor continues to deduct tax at normal rates.

  • Rejection by AO asking for more documents:

Where the Assessing Officer rejects the application or demands additional documents the process gets further extended thereby delaying the approval.

  • Rejection by AO asking for more Information:

The Assessing officer rejects application for want of, more information on the nature of business, reasons satisfying eligibility to apply for lower deduction certificate etc. In such circumstances the process of Application and approval gets delayed leading to loss of time and capital on account of tax deducted at normal rates.

Appendix I: Pre – Requisites of Application for Lower Deduction Certificate

Below mentioned are the Pre- Requisites for application of lower deduction certificate:

  1. Need to have Traces Login ID and Password
  2. Need to know the Jurisdiction of the TDS officer
  3. Ensure No Online TDS default or Income Tax Demand is Outstanding
  4. Financial Statement for the last 3 financial years and projected financials for the current financial year.
  5. Details of Income of last 3 years and projected income for the current financial year.
  6. Income tax returns for the last 3 years
  7. Details of Tax deduction of the last 3 years – Form 26AS
  8. List of customers with respective TAN and projected income from each customer
  9. Registration/exemption Certificate in case of certain entities covered under section 11 or 12. It is mandatory, if declaration no. 1 is selected as a resident covered under Rule 28AB.
  10. Registration/exemption Certificate in case of certain entities covered under section 139(4C) where income is exempt under section 10, If declaration no. 2 is selected as a resident covered under Rule 28AB.
  11. Computation of Income of last 3 Financial Year(or less as applicable) and projected Financial Years
  12. MAT Computation of Income of last 3 Financial Year(or less as applicable) and projected Financial Years

For any query please contact

Eshank Milind Shah

Eshank is a CA, CFA and Registered Valuer with a demonstrated history of working in the Financial Services and Startup Industry. He heads Startup and Transaction Advisory at BJAA and is skilled in VC/PE, Valuations, Corporate Finance, Transaction Structuring, M&A and Income Tax.

Sridevi Dwarkanath

Sridevi is a Chartered Accountant with 5 years of experience in the field of Finance, Tax, Analytics, Startup Advisory and Transaction Advisory.

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