Second, the government also becomes liable to pay interest on the excess amount. Says Bohra: “If the refund amount exceeds 10 per cent of the tax payable, the government pays interest at 0.5 per cent for every month, or part of a month, from the first day of April of the assessment year till the date of refund.” If the refund claimed is less than 10 per cent of tax payable, no interest is paid.
Obtaining a certificate under Section 197 helps. Explains Kapil Rana, founder and chairman, HostBooks: “Under this Section, the taxpayer can obtain a certificate that allows the deductor to deduct tax at a lower or nil rate, as mentioned in the certificate.”
To obtain this certificate, the taxpayer applies using Form 13. Says Vivek Jalan, partner at Tax Connect Advisory Services: “You can apply for a certificate using Form 13 to the assessing officer, who confirms either a lower rate of TDS, compared to the rate specified under the law or a nil rate of TDS, depending on the facts of each case and based on the application made.”
The entity paying the income will then deduct TDS at zero or lower rate, based on the rate specified in the certificate. Says Rana: “Section 197 for lower deduction certificate does not have any relevance in the case of advance tax. If you are liable to pay advance tax, there is very little chance you can get the certificate for lower deduction under this Section.”
Make use of Section 197 to manage your cash flows better. Says Garg: “You can apply for this certificate any time. This certificate works prospectively: it is applicable only to payments received after obtaining the certificate.”