How to claim LTDC for your business? Here's a complete process

According to the Central Board of Direct Taxation, 5.78 crore individuals filed returns disclosing revenue for the 2018-19 financial year over the current financial year. Of these, 1.03 crore showed revenue below Rs 2.5 lakh, and 3.29 crore individuals recorded taxable revenue between Rs 2.5 lakh to Rs 5 lakh. 4.32 crore individuals disclosed income up to Rs 5 lakh of the 5.78 crore returns submitted during this financial year.

Section 197 and 197A of the ITA, 1961, creates the opportunity of NIL or lower tax rate TDS deduction (or TDS exemption). If the taxpayer discovers that his tax burden is slightly smaller than what he pays when filing the returns, he will demand a refund for the same. However, where the taxpayer assumes that his tax obligation for the year is NIL or less than the TDS rate applied to a single source of income, Sections 197 and 197A allow him to qualify for a reduced rate of or no TDS. Taxpayers reporting a low to no TDS rate must apply for the specified form to the Assessing Officer. On the occurrence of the event that the taxpayer does not qualify for a certificate, the refund will also be claimed on the annual return of the taxpayer. Considering the merits of the situation, AO provides a certificate requiring that the assessee's list of consumers neither subtract taxes nor subtract them at a lower rate.

According to the IT Act, the tax deducted at source is an amount deducted as tax from expenses such as wages, fees, commissions, investment interest, leasing, etc., that crosses certain levels. An individual or corporation carrying out the payment is responsible for the tax deduction, and depositing it with the government is referred to as a deductor, whereas the individual or enterprise collecting the gross payment is referred to as a deductor. Regardless of the payment form, currency, cheque, or credit, TDS must be deducted and is connected to both parties' PAN.

Indians pay just 1.5 crores (1.46 crore, to be precise) income tax. That is only a little over 1 percent of India's population and just 1.6 percent of its adult population (over 20 years).

TDS is an advance tax which must be annually deposited with the government. The deductor is responsible for the same. The TDS to be deducted will be asserted in a tax refund by the deductee after they have completed the tax report. The rate typically ranges from 1 percent to 30 percent.

Who Qualifies for LTDC on Form 13?

Applications can be made where each person's income receives TDS. The recipient's income justifies the non-deduction or lower deduction of income tax based on his projected final tax liability. The following can qualify for LTDC:

1. Loss generating companies

2. Non profitable enterprise (profit margins are less than the rate of tax deduction)

3. Assessee who took forward deficit to set out with the profits of the upcoming year

4. Qualified assessee for profit deductions (U/s. 10 or Chapter VI A, etc.)

5. Assessee qualified for a weighted spending deduction

6. A non-inhabitant who sells immovable assets

The following list is indicative but based on the per-case modifications.

How to Claim the Low Tax Deduction Certificate for Your Business?

Requirements for filing an application under Form 13

Financial Results for the last three years and estimated Financial Year 2018-19 financial statements
Information of the last three years' income and Financial Year 2018-19 estimated current year's income
Returns on income tax for the past three years
Tax deduction data for the past three years
List of clients (holding TAN) and estimated consumer profits
Information of the assessee's tax allowance for the past three years.
Certificate of Registration/Exemption in the case of such persons protected by Section 11/12. Where declaration 1 is chosen as a citizen protected by Rule 28AB, it is obligatory.
Certificate of registration/exemption for those organisations protected by 139(4C) where revenue is excluded according to section 10, where declaration 2 is chosen as a citizen covered by Rule 28AB.
Assessment Orders for the past 4 assessment years, if evaluated.

Manual Filing of the application

While there is an online portal facility to file submissions for Form 13, there is an alternative to physically/ manually file too.

Procedure for the online submission of form for TDS Lower/Non-Deduction.

1: Log through your credentials, Taxpayer PAN, and Authentication Code into the TRACES website.

2: Visit the tab " Statements/Forms " and press to start the request for Form no. 13. It shows a window. To go further, select on 'Yes.'

3: As a resident, pick your residential status.

4: On the next screen, a checklist for Section 197 will be in front of you. Click the button to continue.

5: Form-13 appears, pick the Financial Year & Request Type in the drop-down menu, and then press Proceed.

6: Click option with TAN and amount. To pick the number of entries, a dialogue box will be shown. Select the < or equivalent to fifty (Online) alternative to submitting online requests.

7: The user has to fill in the information that requires to be given in the form. Most of the specifics are automatically populated based on the TRACES profile. Users must also pick at least one exemption statement in sections 10, 11, or 12 for those organizations that are not covered by ITR 28AB.

8: Situation 1: Where the consumer chooses an exemption statement in compliance with Section 10, 11, or 12 for such persons covered by Rule 28AB of the Income Tax (Declaration 1 or 2)

If the details have been done, Annexure-I opens up to fill in the details of the Annex.

9: Situation 2: Whether the consumer chooses an ITR 1962 declaration rather than 28AB rule. (The No. 3 Declaration)

Pick the annexe form from the drop-down box, and then press the Proceed button. The customer must pick Annexure-I for Lower Deduction in the case of TDS or Annexure-III for Lower Collection in the case of TDS or Annexure-III in the case of TCS.

Tap on the button to enter the Financial Year Projected Income Computation for which the credential is demanded and submitted. Message info saved successfully would appear on the screen.

10: Click on the submit button to check the specifics of Form-13 after submitting the declaration. For the final submission, click on Submit.

11: A dialogue box to verify the form request will be shown after clicking the submit button via Digital Signature Certificate, E-Verification or OTP for Aadhaar Unique Identification Number.

After you pick the available validation option, click on Proceed. After validation, the Form-13 submission will be successfully submitted. For the submission of Form-13, an email and text message will be submitted.

Under Track Request Form-13, the individual can verify the status option available on the Statements/Forms page. The user may decide to cancel the requests before the status is in submission mode or the AO needs confirmation.

Conclusion

Income tax deductions help minimise one's taxable income and consequently reduce the amount of income tax a person pays at the end of a fiscal year. Simply put, tax deductions on income are tax-free payments incurred during the year, which are then subtracted from one's annual gross income at the time of filing tax returns.

Also read:

1) Types of deductions under section 80C. What is included under 80C?
2) Presumptive Tax: Ways to File Returns & Save Taxes for Creative Professionals
3) How To Pay Income Tax Online? Step-By-Step Guide.
4) How to Save Tax on Rs 1.5 Lakh under 80C?