What is a lower/nil deduction certificate under Section 197 and how do I use it?

Question

tdsguru.in (CA firm) · Accepted Answer

It is a TRACES certificate that lets you deduct TDS at a lower or nil rate for a specific deductee; validate it on TRACES and apply the certified rate only within its limit and validity. A deductee whose tax liability is lower than the normal TDS can apply to the assessing officer for a Section 197 certificate specifying a lower or nil rate. As a deductor, you must validate the certificate number on TRACES and deduct at the certified rate. The lower rate applies only up to the amount certified and within the validity period — beyond either, the normal rate revives. Tracking each certificate's utilisation prevents accidental over-shoot and short-deduction defaults.