Validation of Lower Deduction Certificate

Advisory for Deductors while deducting TDS at lower rate u/s 197 certificates

Deductors deduct tax at lower rate on payment/credit to deductee on production of certificate duly issued by assessing officers under section 197. Deductors quote such certificate number in quarterly TDS statement. Instances of huge default of 'Short Deduction' have been observed due to wrong quoting of 197 certificate number. The scenario of wrong 197 certificate generally arises when the deductor accepts from deductee a manually issued lower deduction certificate by assessing officer & quotes the same in TDS statements.

2. CPC(TDS) has provided the facility of validating the 197 certificate to the deductors on www.tdscpc.gov.in(TRACES).This enables a deductor to first validate the 197 certificates given to him by their deductees and then furnish the same in the TDSITCS statement.

3. If the 197 certificate is not valid as per TRACES validation, the deductor should always insist upon an ITO system generated certificate having a unique 10 digit alpha numeric number. This would minimize the generation of default of "Short Deduction due to 197 certificate".

4. This also applies to certificates issued under section 195(2) & 195(3) by LTU & international taxation officers.

5. Instruction to field authorities to issue only system generated certificate were issued vide instruction No. 36 through F.No. SWITDS/2/2/08-DIT(S)-II[Vol.ll] dated July , 2009 ( copy enclosed).