INCOME TAX

Section 197 of the Income-tax Act, 1961 - Deduction of tax at source – TDS - Certificate of lower deduction or non-deduction of tax at source

Instruction No. 7/2009 [F.No. 275/23/2007-IT-(B)], dated 22-12-2009

I am directed to bring to your notice on the subject of issue of certificates under Section 197. Instruction No- 8/2006 dated 13.10.2006, was issued stating that 197 certificates for lower deduction or nil deduction of TDS u/s 197 are not to be issued indiscriminately and for issue of each certificate, approval of the JCI/Add. CIT concerned need to be taken by the Assessing Officer (AO). Further, a letter of even number dated 6.10.2008 was issued stating that power of issue of certificates under Section 197 would ordinarily be exercised by the officers manning TDS Administration. However, instances are being brought to the notice of Board that the AOs are issuing certificates for lower or non-deduction of tax at source under Section 197 indiscriminately, in contravention of relevant Income Tax Rules and Instructions.

I am, therefore, directed to communicate to you that further to the contents of  Instruction No. 8/2006, prior administrative approval of the Commissioner of Income Tax (TDS) shall be taken (where the cumulative amount of tax foregone by non-deduction/lesser rate of deduction of tax arising out of certificate under Sec, 197 during a financial year for a particular assessee exceeds Rs. 50 lakh in Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmadabad and Pune stations and Rs. 10 lakh for other stations. Once the CIT (TDS) gives administrative approval of the above, a copy of it has to be endorsed invariably to the jurisdictional CIT also.

The content of the above instruction may be brought to notice of all officers working in your charge for strict compliance.