THE ULTIMATE GUIDE TO SURCHARGE PLANNING IN PARTNERSHIP FIRMS, LLPs & COMPANIES (AY 2025–26)

By CA Surekha S Ahuja  

How strategic partner remuneration, firm profit allocation & entity choice can reduce surcharge — with 3-partner examples and clear tax outcomes

When business profits cross ₹5 crore… ₹50 crore… and in many cases ₹100+ crore, one question becomes a goldmine of tax optimisation:

“Can we reduce our surcharge by shifting income between the firm and the partners?”

Most firms either pay full 31.2–31.5% tax at the firm level (30% + 10% surcharge + 4% HEC)
OR
push too much income to partners, triggering 39% tax in their hands (new regime highest slab with capped 25% surcharge).

The truth is:

There is a sweet spot — but only if you understand the surcharge trigger points.

This guide explains that sweet spot with simple examples, law references, charts, and a 3-partner model.

First Principles — How the Law Creates Planning Opportunities

A. Firms & LLPs (same taxation)

• Tax rate → 30%

• Surcharge → 10% (flat; no income-based variations)

• Health & education cess → 4%

→ Effective rate: approx. 31.2–31.5% irrespective of profit level
Whether the firm earns 50 lakhs or 500 crores — rate is the same.

B. Partners (Individuals) – New Regime

• Slab rate up to 30%

• Surcharge capped at 25% (Finance Act 2023 for new regime)

• HEC 4%

→ Effective maximum rate: approx. 39%

C. Companies (Private Limited)

• Base rate → 22% (115BAA) or 30% (regular)

• Surcharge varies:

  • 7% if income > ₹1 crore

  • 12% if income > ₹10 crore

• HEC 4%

→ Effective rate under 115BAA roughly 25.17%.

Bottom-line Difference

Entity	Effective Tax Rate	Surcharge Logic
Firm / LLP	31.2–31.5%	Constant 10%
Partner (Individual)	Up to 39%	Capped 25%
Company (115BAA)	25.17%	7% or 12%

This creates a huge planning avenue:
Shift income to the place with the cheaper surcharge.

The Most Important Question

Should Profit Sit in the Firm or Flow to Partners?

The answer depends on:

(A) Partner income already above ₹2 crore?

→ Then remuneration pushes them into surcharge at max rate → 39%.
→ Keeping income in the firm saves tax.

(B) Firm profit extremely high (₹20–₹200 crore)?

→ Firm will always pay only 10% surcharge, whereas partners reach 25% surcharge.

The rule of thumb

If partner’s post-remuneration income exceeds ₹2 crore, avoid giving more salary.
If partner is below ₹1 crore income, remuneration may reduce total tax.

The 3-Partner High-Profit Example (₹50 crore profit)

Before remuneration: ₹50 crore profit

Allowed remuneration (12(a) limits) easily exceeds what we plan to pay, so assume full eligibility.

We test 4 levels of remuneration to see the tax impact.

Scenario 1: No Remuneration Given

Particulars	Amount
Firm Profit	₹50 crore
Tax @ 31.5%	₹15.75 crore
Partner income	Nil
Total Tax Outflow	₹15.75 crore

Scenario 2: Low Remuneration – ₹1 crore each (Total ₹3 crore)

Particulars	Amount
Taxable profit in firm	₹47 crore
Firm tax @31.5%	₹14.80 crore
Partner income	₹1 crore each
Partner tax @30% slab + 25% surcharge	~₹0.39 crore each
Total partner tax	₹1.17 crore
Total Tax Outflow	₹15.97 crore

Tax increased.
Reason: partners pay 39% on their income, more than firm’s 31.5%.

Scenario 3: Medium remuneration – ₹2 crore each (₹6 crore total)

Particulars	Amount
Firm taxable profit	₹44 crore
Firm tax	₹13.86 crore
Partner tax	₹0.78 crore each
Total partner tax	₹2.34 crore
Total Tax Outflow	₹16.20 crore

Worse.

Scenario 4: High remuneration – ₹3 crore each (₹9 crore total)

Particulars	Amount
Firm taxable profit	₹41 crore
Firm tax	₹12.92 crore
Partner tax	₹1.17 crore each
Total partner tax	₹3.51 crore
Total Tax Outflow	₹16.43 crore

Worst of all.

The Surprising Outcome

When firm profits are very high (₹50 crore, ₹100 crore, etc.):

Giving higher remuneration increases total tax because partners cross surcharge thresholds early.

Best choice:

Keep maximum profit in the firm and pay tax at 31.5%.

Why This Happens – The Surcharge Trigger Difference

Income Level	Firm	Partner
₹1 crore	Same tax rate	30% + 15% surcharge
₹2 crore	Same	30% + 25% surcharge
₹5 crore	Same	30% + 25% surcharge
₹50 crore	Same	30% + 25% surcharge

Partners hit the surcharge ceiling early.
Firms never change surcharge at all.

LLP vs Partnership Firm: Any Difference?

Taxation: Same

• Section 184, 185, 40(b) apply equally

• Rate 30% + 10% surcharge + 4% cess

• Remuneration rules identical

Governance Difference (non-tax)

• LLP gives limited liability

• Better for outside investment and PE funding

• Easier compliance than company

• More flexible in profit-sharing

Tax optimisation → Exactly same outcome as partnership firm

Company vs Firm/LLP – When a Company Wins

At very high profit levels, a company under section 115BAA:

• Pays 22% + 10% surcharge + 4% cess = 25.17%

• No partner-level tax

• No remuneration deduction limit restrictions

• Dividends taxed @ 20.8% (after 2020 DDT abolition)

When Company is Better

• If partners have high personal income (>₹2 crore)

• If company profits are consistently above ₹10–20 crore

• If profits are reinvested rather than withdrawn

• If investor entry or ESOP pool is needed

 The Final Planning Matrix

A. For High Profits (₹20–₹200 crore)

Action	Result
Keep profits in firm/LLP	✔ Lowest tax (31.5%)
Avoid heavy remuneration	✔ Prevent 39% partner tax
Shift withdrawals to loans/dividend-like structures	✔ Savings

B. For Medium Profits (₹5–₹20 crore)

| If partners’ other income < ₹1 crore | Moderate remuneration works |
| If partners’ other income already high | Keep income in firm |

C. For Low Profits (<₹5 crore)

Action	Result
Higher remuneration	✔ May reduce tax
Profit retention in firm	✔ Neutral

Who Should Hold the Profit?

If partner total income after remuneration > ₹2 crore

➡ Keep profit in firm
(because partner surcharge hits 25%)

If partner income < ₹1 crore

➡ Remuneration is tax-neutral or beneficial

If partner income 1–2 crore

➡ Plan carefully — small shifts change surcharge drastically

Conclusion – The One Rule That Matters Most

A firm/LLP pays a flat 10% surcharge — partners pay 25%.
When profits are large, keeping income in the firm wins.

TDS Credit Denial to NRIs Due to Buyer’s Procedural Error: A Judicial Lifeline and Compliance Blueprint

A Professional Guidance Note for NRIs Selling Property in India

I. Executive Summary

A recent judgment by the Delhi High Court in [NRI v. Union of India & Ors., 2025] has redefined how the Indian tax system must balance procedural compliance with substantive justice. An NRI seller faced a ₹46 lakh tax demand because the resident buyer wrongly deposited 20% TDS in Form 26QB—meant for residents—instead of Form 27Q, applicable for non-resident transactions under Section 195. This error led to denial of TDS credit in the NRI’s AIS and ITR, triggering tax, penalty, and repatriation complications. The Court, however, ruled in favour of the NRI, directing the Revenue to rectify the credit and process refund.

This case holds critical compliance lessons and legal implications for NRIs, resident property buyers, and tax professionals.

II. Legal Framework

1. Section 195 – TDS on Payments to Non-Residents

“Any person responsible for paying to a non-resident... shall, at the time of payment, deduct income-tax thereon at the rates in force.”
— Section 195, Income-tax Act, 1961

• Applicability: Any sum (excluding salaries) paid to an NRI taxable under the Act.

• TDS Rate: 20% on capital gains from property (plus surcharge and cess).

• TAN Requirement: Mandatory for buyer to deduct and deposit TDS under Section 195.

2. Section 199 – Credit of TDS

“Any deduction made in accordance with... Chapter XVII shall be treated as a payment of tax on behalf of the person from whose income the deduction was made.”

• Credit is linked to PAN and Form 26AS/AIS.

• Procedural lapses should not override this statutory entitlement.

3. Form 26QB vs 27Q – The Core Error

Particulars	Form 26QB	Form 27Q
Section Applicable	194-IA	195
Buyer Type	Resident	Resident
Seller Type	Resident	Non-Resident (NRI)
TDS Rate	1%	20% (plus surcharge & cess)
TAN Required	Not Required	Mandatory
TDS Certificate	Form 16B	Form 16A

III. The Landmark Case: Facts & Chronology

Case Citation:

[NRI v. Union of India & Ors., Delhi High Court, W.P. (C) 5216/2025, Decided on May 27, 2025]

Summary Timeline:

Date	Event
1998	NRI (USA-based) bought a Pune property
2015	Agreed to sell for ₹2 crore; buyer deducted 20% TDS (~₹18.68 lakh)
Oct 2015	NRI paid advance tax ₹1.91 lakh and repatriated balance
Mar 2023	Notice under Section 148 issued alleging income escaped assessment
Mar 2025	Assessment order demanded ₹46 lakh tax; penalty u/s 270A initiated
Mar 2025	NRI explained TDS deposited under wrong form (26QB instead of 27Q)
May 2025	Delhi HC ordered correction and refund based on tax paid and law

IV. Key Issues & Legal Interpretation

🔸 1. Substance Over Form

• TDS @20% was deducted and deposited with the government.

• Mistake: Deposit was done in Form 26QB (meant for residents).

• Held: Revenue suffered no loss. Tax liability was discharged.

“A buyer’s procedural error cannot prejudice a compliant NRI seller.”
— Delhi HC, May 2025

🔸 2. Judicial View on SOP vs Statutory Rights

• SOP required buyer’s indemnity and consent to correct the form.

• Court held: Administrative SOP cannot override taxpayer’s statutory right to TDS credit under Section 199.

🔸 3. AIS/26AS Not Reflecting Credit

• Since Form 26QB did not link the TDS to the NRI’s PAN, credit did not reflect.

• The I-T system’s rigidity led to tax demand and penalty—even though funds were with the government.

V. Compliance Advisory for NRIs and Resident Buyers

✅ NRI Seller Compliance Checklist

Action	Why It Matters
Inform buyer you are an NRI	Ensures correct section (195) and form (27Q)
Verify TAN availability	Form 27Q requires TAN—not just PAN
Insist on Form 27Q and Form 16A	Critical for TDS credit in AIS/26AS
Monitor Form 26AS & AIS	Ensure timely credit before ITR filing
File ITR within timeline	Claim TDS credit or refund correctly
Document everything	Avoid disputes in case of future litigation

 Resident Buyer Responsibilities

Task	Risk of Non-Compliance
Deduct TDS @20% + cess under Sec 195	Short deduction leads to penalty
Use TAN & file Form 27Q	Filing 26QB for NRI seller is invalid
Issue Form 16A to seller	Proof of TDS deduction and deposit
Correct any filing errors swiftly	Errors in form type can delay seller’s refund for years
Cooperate in form correction	Courts may compel you to assist if NRI moves legal route

VI. Consequences of Procedural Error

Error	Outcome
Filing 26QB instead of 27Q	TDS doesn’t reflect under NRI PAN
AIS and 26AS mismatch	TDS credit cannot be claimed in ITR
Tax demand under Sec 148	Treated as income escaping assessment
Penalty under Sec 270A	Misreporting of income risk
Delay in refund	Even years after TDS deposited

VII. High Court Decision – Summary of Directions

“Revenue is directed to correct the record and reflect the TDS deposited by the buyers to the petitioner’s credit under the return filed in the Form 26QB with effect from the date, the amount was deposited... compute the amount of refund due... All contrary orders stand set aside.”
— Delhi High Court, May 2025

This ruling upholds:

• Taxpayer’s right to credit under Section 199

• Doctrine of fairness and absence of statutory bar on rectification

• Responsibility of the Revenue to uphold substance over procedure

VIII. Future Compliance & Policy Suggestions

• CBDT Clarification Needed: Permit retrospective mapping of Form 26QB to NRI PAN if TDS is deposited with valid PAN.

• Amendment to TRACES & AIS: Allow automatic re-mapping on submission of affidavit + challan copy.

• TDS Correction Portal: Create an interface for correction of form type errors with NRI consent and buyer indemnity.

IX. Conclusion: Legal & Practical Compass for NRIs

This case sets a precedent in tax administration — affirming that technical lapses should not block legitimate TDS credit, especially when tax is fully deducted and paid. It’s a wake-up call for NRIs and buyers to move beyond mere paperwork and enforce legal clarity at the transaction stage.

“In tax, as in law, intent and evidence must triumph over form.”

By internalizing these lessons and setting clear protocols, NRIs can protect themselves from litigation, wrongful tax demands, and financial stress — while the tax ecosystem moves closer to fair, transparent enforcement.

Guide to Buying Property from NRIs: Revised TDS Rates, Key Compliance Steps, and Practical Challenges

When a person purchases immovable property from a Non-Resident Indian (NRI) in India, they are liable to deduct Tax Deducted at Source (TDS) on the entire sale consideration (on every payment made to the seller), as provided under Section 195 of the Indian Income Tax Act, 1961. It is crucial to understand the Tax Residency status of the seller before proceeding with the transaction since the TDS provisions differ between Resident Indians and NRIs.

Who is an NRI for Income Tax Purposes?

An NRI for Income Tax purposes is defined as a person who meets any of the following conditions:

1. Less than 182 days of stay in India during the Financial Year (FY), or
2. Stayed less than 60 days in India during the FY and less than 365 days in the last 4 FYs (Both conditions must be fulfilled).
3. An Indian citizen who leaves India for employment or as a member of the crew of an Indian ship, and has resided in India for less than 182 days in the FY and less than 365 days in the last 4 FYs (Both conditions must be fulfilled).
4. An Indian citizen or Person of Indian Origin (POI) visiting India, having a total Indian income of less than Rs. 15 lakh (other than income from foreign sources), who has resided in India for less than 182 days in that FY and less than 365 days in the immediately preceding 4 FYs.
5. An Indian citizen or POI visiting India, having a total Indian income of more than Rs. 15 lakh (other than income from foreign sources), who has resided in India for less than 120 days in that FY and less than 365 days in the immediately preceding 4 FYs.

It is advisable for the buyer to verify the Tax Residency status of the seller, as TDS provisions vary for Resident Indian Sellers and NRI Sellers.

TDS Rates on Property Sale

1. Resident Indian Seller:

• The TDS rate for Resident Indian Sellers is 1% on the sale consideration above Rs. 50 lakh.

2. NRI Seller:

• The minimum limit of Rs. 50 lakh does not apply for NRI Sellers. TDS is applicable on all property transactions, regardless of the sale consideration, under Section 195 of the Income Tax Act.

TDS Rates for Sale of Property by NRIs (Before 23.07.2024)

The following table outlines the TDS rates applicable for the sale of immovable properties held by NRIs before 23.07.2024:

Sale Consideration	TDS Rate	Surcharge	Total Tax	Health & Education Cess	Effective TDS Rate
Less than Rs. 50 Lakhs	20%	Nil	20%	4% of Total Tax	20.8%
Rs. 50 Lakhs to Rs. 1 Crore	20%	10% of TDS	22%	4% of Total Tax	22.88%
Rs. 1 Crore to Rs. 2 Crores	20%	15% of TDS	23%	4% of Total Tax	23.92%
Rs. 2 Crore to Rs. 5 Crores	20%	15% of TDS	23%	4% of Total Tax	23.92%
Above Rs. 5 Crores	20%	15% of TDS	23%	4% of Total Tax	23.92%

Example:

If an NRI holds the property for more than 2 years and is selling it for Rs. 1.5 crore before 23.07.2024, the TDS calculation would be as follows:

• Sale Consideration: Rs. 1,50,00,000
• TDS @ 20%: Rs. 30,00,000
• Surcharge @ 15%: Rs. 4,50,000
• Total Tax: Rs. 34,50,000
• Health & Education Cess (4%): Rs. 1,38,000
• Total TDS: Rs. 35,88,000

Thus, the seller will receive only Rs. 1,14,12,000 out of the sale price of Rs. 1.5 crore, with the balance of Rs. 35,88,000 being deducted by the buyer and deposited with the Income Tax Department as TDS.

Revised TDS Rates for Sale of Property by NRIs (After 23.07.2024)

The Finance Bill 2024 has revised the TDS rates for the sale of property by NRIs, effective 23.07.2024. The revised TDS rates are as follows:

Sale Consideration	TDS Rate	Surcharge	Total Tax	Health & Education Cess	Effective TDS Rate
Less than Rs. 50 Lakhs	12.5%	Nil	12.5%	4% of Total Tax	13%
Rs. 50 Lakhs to Rs. 1 Crore	12.5%	10% of TDS	13.75%	4% of Total Tax	14.3%
Rs. 1 Crore to Rs. 2 Crores	12.5%	15% of TDS	14.375%	4% of Total Tax	14.95%
Rs. 2 Crore to Rs. 5 Crores	12.5%	15% of TDS	14.375%	4% of Total Tax	14.95%
Above Rs. 5 Crores	12.5%	15% of TDS	14.375%	4% of Total Tax	14.95%

Example:

If an NRI holds the property for more than 2 years and sells it for Rs. 1.5 crore on or after 23.07.2024, the TDS calculation would be as follows:

• Sale Consideration: Rs. 1,50,00,000
• TDS @ 12.5%: Rs. 18,75,000
• Surcharge @ 15%: Rs. 2,81,250
• Total Tax: Rs. 21,56,250
• Health & Education Cess (4%): Rs. 86,250
• Total TDS: Rs. 22,42,500

Thus, the seller will receive only Rs. 1,27,57,500 out of the sale price of Rs. 1.5 crore, with the balance of Rs. 22,42,500 being deducted by the buyer and deposited with the Income Tax Department as TDS.

Obligations of the Buyer

1. Deduction and Deposit of TDS: The buyer is obligated to deduct TDS at the prescribed rates (either the standard rates or the lower/nil deduction certificate issued by the Income Tax Department) on every payment made to the seller.

2. Application for TAN: The buyer must apply for a Tax Deduction Account Number (TAN). If the property is jointly purchased, all parties involved in the investment are required to obtain a TAN.

3. Deposit of TDS: The TDS must be deposited with the Income Tax Department via e-challan by the 7th day of the next month after payment to the seller.

4. Filing TDS Return: After depositing TDS, the buyer must file the TDS return in the following quarter and download Form 16A to provide to the seller.

5. Penalties for Non-Compliance: Failure to deduct TDS at the prescribed rate can result in penalties under Section 271C of the Income Tax Act. The buyer will be liable for the penalty equivalent to the TDS amount not deducted, along with interest under Section 201.

Advice to Buyers and Sellers

• For Buyers: It is essential to verify the tax residency status of the seller before entering into a property transaction. If the seller is an NRI, TDS must be deducted at the prescribed rates. In case the seller provides a Nil/Lower Deduction Certificate, follow the rates mentioned in the certificate.

• For Sellers: Non-compliance with TDS deduction rules may result in difficulties repatriating the sale proceeds abroad. Additionally, misrepresentation of tax residency status can attract penalties and prosecution by the Income Tax Department.

Navigating TDS on NRI Property Sales in India: A Comprehensive Guide to Rates, Rules, and Compliance Before and After 23rd July 2024

When a Non-Resident Indian (NRI) sells immovable property in India, the buyer is obligated to deduct tax at source (TDS) under Section 195 of the Income Tax Act, 1961. The correct application of this provision is crucial for ensuring tax compliance, avoiding penalties, and facilitating the seller’s ability to repatriate funds abroad. This guide provides a detailed legal and practical analysis of the applicable TDS rates, the impact of changes effective 23rd July 2024, and compliance steps for both buyers and sellers.

1. Who is an NRI for Tax Purposes

Under Indian tax law, an individual is treated as a Non-Resident Indian (NRI) for a financial year if they meet any of the following:

• Stayed in India less than 182 days during the relevant FY,

• OR stayed less than 60 days in the FY and less than 365 days in the preceding 4 FYs.
  Additional thresholds apply for Indian citizens or Persons of Indian Origin (PIOs) visiting India:

Indian Income (excluding foreign)	Residential Status Threshold
Less than ₹15 lakh	Resident if stay ≥ 182 days
₹15 lakh or more	Resident if stay ≥ 120 days

Thus, many overseas Indians selling property in India qualify as NRIs under these tests.

2. TDS on Property Sales – Section 195 Framework

2.1 📅 Transactions Before 23rd July 2024

For properties held for more than 2 years (classified as Long-Term Capital Assets), the base TDS rate is 20%. Surcharge and cess are added based on sale value.

Sale Consideration	Base Rate	Surcharge	Effective TDS Rate (Incl. 4% Cess)
Less than ₹50 lakhs	20%	Nil	20.8%
₹50 lakhs – ₹1 crore	20%	10%	22.88%
₹1 crore – ₹2 crore	20%	15%	23.92%
₹2 crore – ₹5 crore	20%	15% (capped)	23.92%
Above ₹5 crore	20%	15% (capped)	23.92%

Note: As per the Finance Act 2023, surcharge on long-term capital gains is capped at 15%, even if the total income crosses ₹2 crore or ₹5 crore. Earlier, it could go up to 37%.

Example:
Sale Price: ₹1.5 crore

• LTCG TDS @ 20% = ₹30,00,000

• Surcharge @ 15% = ₹4,50,000

• Subtotal = ₹34,50,000

• Cess @ 4% = ₹1,38,000

• Total TDS = ₹35,88,000

• Net to seller = ₹1,14,12,000

2.2 📅 Transactions On or After 23rd July 2024

As per CBDT Notification dated 23.07.2024, the base TDS rate on LTCG for NRIs is reduced to 12.5%. The surcharge cap of 15% remains.

Sale Consideration	Base Rate	Surcharge	Effective TDS Rate (Incl. 4% Cess)
Less than ₹50 lakhs	12.5%	Nil	13%
₹50 lakhs – ₹1 crore	12.5%	10%	14.3%
₹1 crore – ₹2 crore	12.5%	15%	14.95%
₹2 crore – ₹5 crore	12.5%	15% (capped)	14.95%
Above ₹5 crore	12.5%	15% (capped)	14.95%

Example:
Sale Price: ₹1.5 crore

• LTCG TDS @ 12.5% = ₹18,75,000

• Surcharge @ 15% = ₹2,81,250

• Subtotal = ₹21,56,250

• Cess @ 4% = ₹86,250

• Total TDS = ₹22,42,500

• Net to seller = ₹1,27,57,500

3. Importance of Execution Date

The date of execution (transfer) determines the applicable TDS rate—not the agreement date.

 Scenario:

• Agreement Date: 1st June 2024

• Execution Date (Sale Deed): 1st August 2024

🔍 Since execution is after 23rd July 2024, the reduced rate of 12.5% (with capped surcharge) will apply.

4. Buyer’s Legal Responsibilities

 Key Compliance Steps:

1. Obtain TAN – A Tax Deduction Account Number is mandatory under Section 195.

2. Deduct Correct TDS – As per execution date and value brackets.

3. Deposit TDS – By the 7th of the next month via e-challan 281.

4. File Form 27Q – Quarterly TDS return for NRI payments.

5. Issue Form 16A – TDS certificate to the seller.

⚠️ Consequences of Non-Compliance:

Default	Penalty / Interest
TDS not deducted	Equal to shortfall u/s 271C
TDS deducted but not deposited	Interest u/s 201(1A) @ 1–1.5% per month
Incorrect rate used	Entire shortfall becomes buyer’s liability

Example:
TDS deducted @ 1% (wrong) instead of 20.8% on ₹1.5 Cr →
• TDS shortfall ≈ ₹34,38,000
• Buyer liable for penalty and interest on this amount

5. Seller’s Legal and Strategic Considerations

 What NRIs Must Ensure:

• Declare NRI Status: Misclassification can lead to wrong TDS deduction.

• Plan Repatriation: Without valid TDS, Form 15CA/15CB issues may block repatriation.

• Apply for Lower/Nil TDS Certificate: Via Form 13, especially if actual capital gain is much lower than sale consideration.

• File ITR in India: Claim refund, if TDS exceeds tax payable.

⚠️ Without a Lower Deduction Certificate, TDS is deducted on gross sale value, not net capital gain.

Summary Table of Key Rates

Period	Base TDS	Max Surcharge	Effective Max Rate (incl. 4% cess)
Before 23 July 2024	20%	15%	23.92%
On/After 23 July 2024	12.5%	15%	14.95%

Final Advice to NRIs and Buyers

✔️ Buyers must exercise due diligence: get TAN, deduct TDS at the correct rate, file timely returns, and issue certificates.
✔️ NRIs must plan their transactions smartly—seek professional advice, obtain lower deduction certificates, and file Indian tax returns to claim refunds or carry forward losses.

Simple Guide to Getting a Lower TDS Certificate through TRACES

Dealing with taxes can sometimes feel like navigating through a dense forest without a map. If you're looking to get a certificate for lower tax deduction at source (TDS) under section 197 of the Income Tax Act, 1961, this guide is your compass. We'll walk you through the process step-by-step, using simple language. Let’s get started!

First, Sign Up on TRACES:

TRACES stands for TDS Reconciliation Analysis and Correction Enabling System. It’s the place where you need to start. Here’s how:

1. Go to the TRACES website: Open your web browser and visit https://contents.tdscpc.gov.in/.
2. Become a New User: Click on the "Login" button and choose the "Register as New User" option.
3. Pick ‘Taxpayer’: You’ll see a drop-down list; select "Taxpayer" from it.
4. Fill in the Form: Once you click “Proceed”, a registration form will pop up. Fill it with the necessary information.
5. Submit and You’re Done: After submitting the form, your registration on TRACES is complete.

Next, Apply for Form 13 on TRACES:

After registering, you need to apply for Form 13. Here’s what to do:

1. Log In and Set Up: Log into TRACES. Go to ‘My Profile Tab’ and register the Digital Signature Certificate (DSC) of the authorized person.
2. Request Form 13: Click on the ‘Statements / Form’ tab and select ‘Request for Form 13’.
3. Fill in Details in Form 13: You need to enter various details like:
   • Basic company and authorized person details (this should fill in automatically).
   • Your income details and the TDS section applicable (like Section 194C, 194J, etc.).
   • The TDS rate you are proposing.
   • Income details for the current and last financial year.
   • Your estimated tax computations.
4. Upload Documents: You will need to upload several documents, including:
   • Final Assessment orders of the last 4 years.
   • Estimated income and tax computation details.
   • Audited Financial Statements of the last 3 years.
   • Projected Balance Sheet & Profit/Loss statement.
   • Copies of TDS returns for the last 2 years.
5. Submit Form 13: After filling in the details and uploading documents, submit Form 13.

After Submitting Form 13:

1. Review by AO: The Assessing Officer (AO) will review your form and may ask for clarifications.
2. Further Approvals: After the AO's approval, the application moves up for approval by Additional CIT, then CIT.
3. Certificate Generation: Once approved by CIT, your application is complete. The system will then generate your Lower Withholding Certificate.
4. Download Certificate: You can download this certificate from the TRACES portal.

There you go! With these steps, you can navigate through the process of obtaining a Lower TDS Certificate under section 197. Remember, patience is key, and careful filling of forms and uploading of documents can make the journey smoother