To protect one’s cash flow from the all pervasive TDS deductions, an assessee having low income tax relative to his income needs to apply for a lower/nil TDS deduction certificate. This needs to be applied for every financial year and/or for every stream of income as the case may be at the option of the assessee.
For instance, a non-resident having long term capital gains arising from sale of property as the only source of income may have to apply for lower TDS deduction certificate, else he suffers a flat 20 per cent TDS on the entire sale consideration. Lower/nil TDS application is through Form 13 on the Traces portal, warranting e-verification for a resident and, generally, with a digital signature for a non-resident.
The Form 13 template on Traces needs to be made more objective/user-friendly. It does not support auto totalling or an inbuilt tax computing tool either. Besides, the filing warrants past year’s returns/assessment orders to be enclosed therein. This is possibly because the application for lower/nil TDS certificate goes to the respective jurisdictional assessing officer (AO) while filed returns are with CPC, Bengaluru.
It also appears trite to file documents which are already with the department. It would be better if Form 13 also goes to the CPC for better control/efficiency/management. The order for lower/nil deduction certificate is a pan-India electronically controlled document and is also an appealable order under the Act and like any other order has to be an objective/speaking order.
Further approval
Earlier it was issued by the AOs under their own signature. The present law requires approval of a senior officer, ACIT/JCIT/CIT as the case may be, to additionally endorse the stand of the AO. To make Form 13 orders more speaking, cue may be taken from the CPC assessment orders which manifest returned income vs the assessed income in an objective manner with a reasoning.
Copies of the issued lower/nil TDS certificates currently do not show up on the new income tax portal under the assessee’s login, which probably is only a temporary glitch.
Normally lower/nil TDS orders are protective assessments where either the income/estimated profit is questioned for understatement or deductions are examined for excess claiming. Thus the order generally comes with a higher TDS rate than what was applied for. This is well understood for cases of business/floating incomes/profits/gains.
In the case of non-residents, especially those having one-off capital gains, protective assessment will require the non-resident to subsequently file a return of income to claim refund of excess TDS deducted. Instead, the process of return filing may be inbuilt alongside the lower/nil TDS certificate/form for future perusal in lieu of return of income.
It is well understood that TDS is only one method of recovery of tax and thus is only an approximation of the actual levy. Nonetheless, a little tweak in the process will help a lot of assessees having one-off incomes skip the otherwise arduous and challenging return filing process on the new portal besides enabling them to meet their tax obligations in full.
The government has been pursuing tax reforms on a war footing. On that same thought, Form 13 filing and its assessment process needs an objective revisit.
The writer is a chartered accountant