Form 13 Income Tax: What is Form 13, Eligibility & Documentation

Form 13 income tax is an essential part of the TDS deduction application. If a recipient of payment believes that their income is not fully taxable in India, they can opt for Form 13. 

This form can be conveniently filed online through the official TRACES website. 

To support the claim of minimal or no tax liability in India, the applicant may be required to provide supporting documents. 

This article explains what Form 13 is, why you need it, and the benefits of filing it.

What is Form 13 in Income Tax?

Form 13, also known as the TDS Deduction Application, plays a crucial role in managing Tax Deduction at Source (TDS) under Section 197 of the Income Tax Act, 1961. 

TDS is a mandatory deduction made by individuals when certain payments are made, as per the Income Tax Act's requirements. 

These deducted TDS amounts must be deposited with the Income Tax Department within specific deadlines. To request a lower or no deduction of TDS, taxpayers can submit Form 13 to the Assessing Officer (AO).

Once the Form 13 application is thoroughly filled out, it should be submitted to the jurisdictional Assessing Officer (AO) for TDS. 

The AO has a maximum of 30 days from the end of the month when the application is received to process it. 

The AO will review the submitted documents and may request additional information or documents before deciding to issue the certificate or reject the application.

Why Do You Need Form 13 For TDS Deduction?

Sometimes, your income has taxes deducted at the source, known as TDS (Tax Deducted at Source). But your actual total tax bill should be calculated at the end of the year using the Income Tax Slab Rates. In some cases, the TDS deducted is more than what you owe in taxes.

When this happens, the TDS is taken out first. Later, when you file your Income Tax Return, you can claim a TDS refund for the excess amount deducted. 

However, you can only file income tax returns at the end of the financial year, which can be a lengthy process. And if the refund is substantial, it might take a while for the Income Tax Department to process it.

To simplify things for taxpayers, the government introduced Section 197. This section allows individuals to apply for a Nil/Lower TDS deduction certificate if their total tax liability at the end of the year is less than the TDS amount deducted.

To request a Nil/Lower TDS deduction, you need to fill out Form 13 and submit it to the Income Tax Officer. If the tax officer agrees that a lower TDS deduction is justified, they will issue a certificate under Section 197.

Who Can Apply Using Form 13 for TDS Deduction?

You can apply using Form 13 income tax if your income is subject to TDS under the mentioned sections, but you believe that your final tax liability should either be lower or that no tax should be deducted based on your estimated tax liability.

Anyone, including businesses, can use a Section 197 application. However, for certain specific types of income, individual residents or non-firm/non-company individuals can also submit a self-declaration using specified forms like Form 15G or Form 15H to request no TDS deduction.

Documents Needed For Form 13 Application

1. Copies of your income tax returns, including all attachments and acknowledgments, for the past three financial years.

2. Copies of assessment orders for the past 3 financial years.

3. If you have a business or professional income, include copies of financial statements and, if applicable, audit reports for the past three financial years.

4. Provide profit and loss projections for the current financial year (if applicable).

5. Include income statement calculations for the past three financial years and an estimated calculation for the current financial year.

6. A photocopy of your PAN Card.

7. Ensure you have the Tax Deduction Account Number (TAN) of all parties responsible for making payments to you.

8. Estimate your income for the current financial year.

9. Depending on your income nature, you may need additional documents as required.

Income Covered Under Section 197

When a certificate is issued under Section 197, TDS will be deducted based on the rates specified in that certificate. This certificate will be available for download on the Income Tax portal.

The option for nil or lower TDS deduction is only applicable after the Income Tax Officer has issued a certificate in response to a Form 13 application. 

This certificate must be provided to the entity responsible for deducting TDS, with the exception of payments made as Interest on Securities or Interest on Fixed Deposits under Section 197A. 

In all other cases, this certificate is required, and in certain cases, Form 15G/Form 15H must also be submitted. You can apply for a Section 197 certificate if the income you receive falls under any of the following sections subject to TDS:

How to Apply for Form 13 for TDS Deduction?

To request approval for nil or lower TDS deduction, you need to submit an application using Form 13 to the Assessing Officer (TDS). This form can be filed either electronically or manually. 

In select regions like Mumbai, Tamil Nadu, and Karnataka, online filing of Form 13 is available, allowing for quicker processing of applications for reduced or zero tax deductions under Section 197(1) of the Income Tax Act of 1961. It's advisable to provide complete and accurate information in your application to expedite the process.

Once your application is approved by the Assessing Officer (AO), they will issue a certificate. You can attach a copy of this certificate to the invoice provided to the deductor as proof of the lower tax deduction.

To apply for a Nil/Lower TDS deduction under Section 197, you must submit Form 13 for TDS Deduction to the income tax officer.

Details Required in Form 13

In Form 13 for TDS Deduction, you'll need to provide various details, including:

1. Your name and Permanent Account Number (PAN).

2. The purpose for which the payment is received.

3. Income details for the past three years and income projections for the current year.

4. Information about tax payments made in the past three years.

5. Tax deducted/paid for the current financial year.

6. An estimate of your tax liability for the current year.

7. Email address and mobile phone number.

Electronic Filing

For electronic filing of Form 13 for TDS Deduction, deductees can log in to the TRACES website to submit their applications electronically. Upon approval, you will receive a certificate for income tax deduction at a lower rate or no deduction of income tax under Section 197.

If you are not registered on TRACES, you will need to register first to log in and file your Form 13 the for TDS Deduction application.

The application can be submitted electronically either under a digital signature or through an electronic verification code.

Once your online application is successfully submitted, it will reach the TDS Assessing Officer through their "TRACES AO PORTAL.”

You can track the status of your application by selecting "Track Request for Form 13" under the "Statement/Forms" tab.

When the Assessing Officer is satisfied with the application and determines that the income justifies the lower or nil deduction, they will approve it.

The details of the lower/nil tax deduction, along with the applicable date, will be communicated to both taxpayers and deductors (via their TAN number).

Documents Needed for Form 13 Application

To complete your Form 13 application, you will need the following documents:

1. Copies of income tax returns, along with any attachments and acknowledgments, for the three previous financial years.

2. Copies of assessment orders for the three previous financial years.

3. For individuals with business or professional income, copies of financial statements and, if applicable, audit reports for the three previous financial years.

4. If applicable, profit and loss projections for the current financial year.

5. Income statement calculations for the three previous financial years and estimated calculations for the current financial year.

6. Photocopy of your PAN Card.

7. Tax Deduction Account Number (TAN) details for all parties responsible for making payments to you.

8. Estimated income for the current financial year.

Depending on the nature of your income, additional documents may be required.

Important Points to Remember

1. A Section 197 certificate is only valid for the specified assessment year unless it's canceled or the certificate's expiration date passes.

2. The lower or nil deduction certificate is only valid for the specific period and income limit mentioned in the certificate for the respective deductor.

3. You can also avoid tax deductions on your income by applying for Form 15G or 15H.

   - Form 15G is for bank fixed deposit holders, ensuring no TDS is deducted from their interest income if they are not individuals below 60 years of age or HUF.

   - Form 15H is for individuals above 60 years of age with zero tax liability. No tax is deducted at the source when their income is disbursed.

Also Read: Income Tax Department Issues Regulations for Valuing Startup Investments, Addressing Angel Tax

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