My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
Section 197(1) lets the payee apply to the Assessing Officer for a certificate that the payer may deduct at a lower rate, or not at all. It is not open-ended: it works only for the sections named in it, and the Assessing Officer must be satisfied that “the total income of the recipient justifies” the lower rate. The list is sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195 — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 and 194Q by Act No. 15 of 2024 with effect from 1 October 2024. Section 197(2) then binds the payer: once a certificate is given, he deducts at the certified rate, or nothing, until the Assessing Officer cancels it. Section 197(2A) is the rule-making power, and the rules made under it are rule 28 (application in Form No. 13, filed electronically), rule 28AA (how the rate is worked out and how long the certificate lasts) and rule 28AB (a no-deduction certificate for trusts and other section 139(4C) filers). Nothing in the section or the rules confers a power to backdate a certificate, and in substance it operates forward: rule 28AA(4) sends it to the named deductor, who cannot un-deduct months already past. From 1 April 2026 this machinery is gone — the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025 and the successor is section 395 of the 2025 Act, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026, and from the same date section 395(6) lets that application go to a prescribed income-tax authority instead of the Assessing Officer.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-10-01, reported as Section 197 of the Income-tax Act, 1961, as amended up to 2025. It bears on section 197, section 197(1), section Rule 28AA, section Rule 28, section Rule 28AB, section 206AA, section 206AA(1)(iii), section 197A, section 195, section 195(2), section 199, section 192, section 193, section 194, section 194A, section 194C, section 194D, section 194G, section 194H, section 194-I, section 194J, section 194K, section 194LA, section 194LBA, section 194LBB, section 194LBC, section 194M, section 194-O, section 194Q, section 201(1), section 201(1A) of the Income Tax Act 1961, in TDS Defaults, Refunds, Interest & Condonation and How Tax Law Is Read matters.
A lower-deduction certificate is the only lawful way to stop tax being withheld from you at a rate you do not owe. Everything else — asking the payer to deduct less, netting it off, arguing about it afterwards — puts the payer in default under section 201(1) and on the hook for interest under section 201(1A). Section 197(2) is what makes the certificate safe for the payer: he deducts at the certified rate until it is cancelled, and he is protected while he does, which is why rule 28AA(4) sends the certificate to him and not to you. The timing is where the money is lost. The certificate runs only for a period of the previous year specified in it, and it operates on what the deductor does next; it cannot reach deductions he has already made and paid over. Apply in November for a year that began in April and seven months of full-rate deductions are gone until your refund comes, so a section 197 application is an April job. From 1 April 2026 the application itself has changed: the 1961 Act is repealed, the certificate issues under section 395 of the Income-tax Act, 2025, the form is Form No. 128 under rule 213 of the Income-tax Rules, 2026, and section 395(6) now allows the application to go to a prescribed income-tax authority for electronic verification. A Form No. 13 filed for a period falling on or after 1 April 2026 is filed under a repealed provision.
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The operative text of section 197 of the Income-tax Act, 1961, as it stood for deductions up to 31 March 2026: “197. Certificate for deduction at lower rate. (1) Subject to rules made under sub-section (2A), where, in the case of any income of any person or sum payable to any person, income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. (2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. (3) [***]” Two footnote markers sit inside sub-section (1). Footnote 9, against “194LBA”, reads “Ins. by Act No. 08 of 2023, w.e.f. 1-4-2023.” Footnote 10, against “194Q”, reads “Ins. by Act No. 15 of 2024, w.e.f. 1-10-2024.” The published version immediately before it carries the same two footnotes in the same places, there numbered 11 and 12. The footnote that names the rules appears on the older published versions rather than the latest. One of them carries it as footnote 59a: “See rules 28(1), 28AA, 28AB and 29 and Form No. 13.” Two earlier versions carry the same note, as footnotes 48 and 30. The omitted sub-section (3) is explained in a footnote to the empty sub-section on one of the oldest published versions. The footnote numbering there is not stable between copies and is therefore not cited; the footnote text is: “Sub-section (3) omitted by the Finance Act, 1986, w.e.f. 1-4-1987. Prior to its omission, sub-section (3), as substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, stood as under: ‘(3) Where the principal officer of a company considers that, by reason of the provisions of section 80K, the whole or any portion of the dividend referred to in section 194 will be deductible in computing the total income of the recipient, he may, before paying the dividend to the shareholder or issuing any cheque or warrant in respect thereof, make an application to the Income-tax Officer to determine the appropriate proportion of the dividend to be deducted under the provisions of section 80K; and on such determination by the Income-tax Officer no tax shall be deducted on such proportionate amount.’” That pre-omission text does not rest on the footnote alone. The oldest published version of the section prints it as live section text, in the same words, together with the pre-1992 sub-section (1): “197. (1) Where, in the case of any income of any person other than a company— (a) income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194A and 195, (b) being a non-resident, income-tax is required to be deducted at the time of payment at the rates in force under the provisions of section 194, the Income-tax Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax as the case may be, the Income-tax Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate.” THE RULES Rule 28, headed “Application for grant of certificates for deduction of income-tax at any lower rates or no deduction of income-tax”: “(1) An application by a person for grant of a certificate for the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, under sub-section (1) of section 197 shall be made in Form No. 13 electronically, — (i) under digital signature; or (ii) through electronic verification code. (2) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall lay down procedures, formats and standards for ensuring secure capture and transmission of data and uploading of documents and the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the furnishing of Form No.13.” Footnote 92 to that rule: “Substituted by the IT (Eleventh Amdt.) Rules, 2018, w.e.f. 25-10-2018.” Rule 28AA, headed “Certificate for deduction at lower rates or no deduction of tax from income other than dividends”: “(1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax. (2) The existing and estimated liability referred to in sub-rule (1) shall be determined by the Assessing Officer after taking into consideration the following:— (i) tax payable on estimated income of the previous year relevant to the assessment year; (ii) tax payable on the assessed or returned or estimated income, as the case may be, of last four previous years; (iii) existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957; (iv) advance tax payment, tax deducted at source and tax collected at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28; (3) The certificate shall be valid for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period. (4) The certificate for deduction of tax at any lower rates or no deduction of tax, as the case may be, shall be issued direct to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate: Provided that where the number of persons responsible for deducting the tax is likely to exceed one hundred and the details of such persons are not available at the time of making application with the person making such application, the certificate for deduction of tax at lower rate may be issued to the person who made an application for issue of such certificate, authorising him to receive income or sum after deduction of tax at lower rate. (5) The certificates referred to in sub-rule (4) shall be valid only with regard to the person responsible for deducting the tax and named therein and certificate referred to in proviso to the sub-rule (4) shall be valid with regard to the person who made an application for issue of such certificate. (6) The Principal Director General or Director General of Income-tax (Systems) shall lay down procedures, formats and standards for issuance of certificates … and shall be responsible for evolving and implementing appropriate security, archival and retrieval policies.” Clauses (v) and (vi) of sub-rule (2) are shown as omitted. The footnotes to that rule are 93 (“Sub. for ‘income, as the case may be, of the last three’ by the IT (Eleventh Amendment) Rules, 2018, w.e.f. 25-10-2018”), 94 and 96 (insertion and substitution by the same amendment rules and date) and 95 (“Omitted by the IT (Eleventh Amendment) Rules, 2018, w.e.f. 25-10-2018”). Rule 28AB, headed “Certificate of no deduction of tax in case of certain entities”, lets a person in receipt of income from property held under trust who claims exemption under section 11 or section 12, and a person required to file a return under section 139(4C) (a scientific research association, news agency, association or institution, fund or trust or university or other educational institution, hospital or other medical institution or trade union), apply for a certificate under section 197(1) to receive income without deduction of tax. The conditions in sub-rule (2) are that the returns of income for all assessment years already due have been furnished, and that the entity “is for the time being approved for the purpose of exemption from income-tax”. Sub-rule (4) requires the Assessing Officer to be satisfied that the conditions are met and that “the issue of any such certificate will not be prejudicial to the interests of revenue”. Sub-rule (6): “The certificate shall be valid for the financial year specified therein unless it is cancelled by the Assessing Officer at any time before the expiry of the said financial year.” THE PAN BAR Section 206AA, sub-section (4): “No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.” Sub-section (1) of the same section opens “Notwithstanding anything contained in any other provisions of this Act” and sets the floor at the higher of the rate in the relevant provision, the rate or rates in force, and twenty per cent, where the deductee does not furnish his PAN; two provisos cut that twenty per cent to five per cent for section 194-O and for section 194Q.
As at 23 September 2026, and for deductions made up to 31 March 2026: Section 197 does three things. It gives the payee — not the payer — a right to apply; it gives the Assessing Officer a power to certify a lower rate or nil, conditioned on his satisfaction that “the total income of the recipient justifies” it; and it makes the certificate binding on the payer until cancelled. It is a closed list. The section works only where tax “is required to be deducted … under the provisions of” one of the sections it names. The list has grown, and the additions are the amendment history of the section. As it now stands the list is: 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195. Reading the vintages back: — 194Q was added by Act No. 15 of 2024 with effect from 1 October 2024 (footnote 10). The published version before that amendment still ends the list “194M, 194-O and 195”; the next one already carries 194Q. — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 (footnote 9). The published version before that date does not have it; the next one does, with footnote 60 reading “Inserted by the Finance Act, 2023, w.e.f. 1-4-2023.” — 194M and 194-O were added by Act No. 23 of 2019 and Act No. 12 of 2020 (footnotes 31 and 32). The published versions before those dates end the list “194LBB, 194LBC and 195”. Two sections are conspicuously absent and their absence is the point. Section 194N (cash withdrawal) and section 194B are not in the list, so no section 197 certificate can be issued for them. Neither is section 206C, which is a collection provision and has no place in a deduction section. The test is the recipient's total income, not the payer's convenience. Rule 28AA(1) restates it as “existing and estimated tax liability” and rule 28AA(2) fixes the four things the Assessing Officer must take into account: tax payable on the estimated income of the previous year; tax payable on the assessed, returned or estimated income of the last four previous years; existing liability under the Income-tax Act, 1961 and the Wealth-tax Act, 1957; and advance tax, tax deducted at source and tax collected at source for the year till the date of the application. “Last four previous years” is itself an amendment: footnote 93 records that it was substituted for “the last three” by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018, the same amendment that put the whole process online. The certificate is time-bound and payer-specific. Rule 28AA(3): valid “for such period of the previous year as may be specified in the certificate”. Rule 28AA(4): issued direct to the deductor, under advice to the applicant — the payee does not receive it and hand it over. Rule 28AA(5): valid only for the deductor named in it. The single exception is the proviso to rule 28AA(4): where the deductors are likely to exceed one hundred and their details are not available when the application is made, the certificate may be issued to the applicant himself, authorising him to receive the income after deduction at the lower rate; sub-rule (5) then makes that certificate valid with regard to the applicant. The application is Form No. 13, filed electronically under digital signature or electronic verification code — rule 28(1), substituted by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018. The departmental help page “Certificate of lower/no deduction of tax at source” states that Form No. 13 is filed through the TRACES portal and that PAN is mandatory. Rule 28AB is a separate, narrower route: a nil-deduction certificate for an exempt entity — a section 11 or 12 claimant, or a section 139(4C) filer — granted only if all due returns are in, the entity is for the time being approved for exemption, and the certificate will not prejudice the revenue. It runs for the financial year specified, not for a part of the previous year. Section 197 is not section 195(2) or section 195(3). Section 195(2) is the payer's application: where the person paying a non-resident “considers that the whole of such sum would not be income chargeable in the case of the recipient”, he asks the Assessing Officer to determine “the appropriate proportion of such sum so chargeable”, and deducts only on that proportion. It is about how much of the remittance is income, not about the recipient's tax rate. Section 195(3) is the non-resident payee's own application for a certificate to receive the sum without deduction, granted subject to rules made under section 195(5). Section 197 overlaps with section 195 because section 195 is in the section 197 list — so a non-resident payee has a choice of route, and the resident payer has only section 195(2). Section 197 is not section 197A either. Section 197A is self-service: the payee files a declaration with the payer and no Assessing Officer is involved. It is available only to the persons and for the sections named in it, and only where the tax on estimated total income will be nil. Section 197 is discretionary, officer-granted, and can certify a lower rate as well as nil. On section 206AA, start with what the two sub-sections actually turn on, because they turn on different acts. Section 206AA(4) bars the grant: no certificate under section 197 may be given unless the application made to the Assessing Officer contains the applicant's PAN. Section 206AA(1) bites on something else — the deductee failing to furnish his PAN “to the person responsible for deducting such tax”. Putting a PAN on an application to the Assessing Officer is not the same act as giving it to the payer. So the question “can a section 197 certificate be issued below the section 206AA rate for a payee with no PAN” has a clean answer: no certificate can be issued at all, because section 206AA(4) stops it at the door. But the further question — what if a certificate holder's deductor does not have the PAN on file — is not answered by that. What answers it in practice is rule 28AA(4) and (5): the certificate goes direct to the named deductor, so he has the PAN-bearing certificate in his hands. Where that has not happened, section 206AA(1) opens “Notwithstanding anything contained in any other provisions of this Act”, and on those words the twenty per cent floor would override the certificate. The certificate is not a substitute for the payee giving his PAN to the payer. On retrospectivity, neither section 197 nor the rules confer a power to backdate, but neither of the two obvious textual pointers is as strong as it first looks. Section 197(2)'s “until such certificate is cancelled” fixes when the payer's duty ends, not when it begins. Rule 28AA(3)'s “such period of the previous year as may be specified in the certificate” is neutral on whether the specified period may already have begun. What actually carries the weight is rule 28AA(4) and (5): the certificate issues to the named deductor and operates on what he does, and a deductor cannot un-deduct months already past and already paid over. So a certificate is in substance prospective, and nothing in section 197, rule 28, rule 28AA or rule 28AB addresses deductions already made or undoes them. Tax already deducted and paid over stays deducted; the payee takes credit for it under section 199 and recovers any excess as a refund when the return is processed. This is the position on the text alone; the judgments in the library on section 197 certificates have not been read against it. What changed, and when: — 1 April 1987: sub-section (3), the section 80K dividend determination, was omitted by the Finance Act, 1986 (footnote to the empty sub-section; the same sub-section is live text on the oldest published version). The sub-section number has stood empty since. — 1 June 1992: the section was recast by the Finance Act, 1992 into its present shape, replacing a lettered structure that applied only to “any income of any person other than a company” and ran on sections 192, 193, 194A and 195 (an older published version sets out the pre-1992 text in a footnote; the oldest prints it as live text). — 1 September 2019 and 1 April 2020: sections 194M and 194-O brought in by Act No. 23 of 2019 and Act No. 12 of 2020. — 25 October 2018: the IT (Eleventh Amendment) Rules, 2018 moved Form No. 13 online, lengthened the look-back in rule 28AA(2)(ii) from three previous years to four, and omitted clauses (v) and (vi) of that sub-rule. — 1 April 2023: section 194LBA added by Act No. 8 of 2023. — 1 October 2024: section 194Q added by Act No. 15 of 2024. This is the latest change and it is why the current text is dated from that day. — Neither the Finance Bill, 2025 (Bill No. 14 of 2025) nor the Finance Bill, 2026 (Bill No. 3 of 2026) contains a clause amending section 197 of the 1961 Act. That is unsurprising and not much comfort: the Finance Bill, 2026 amends the successor instead, at clause 74 “Amendment of section 395”, and the enacted result is described below. — 1 April 2026: the Income-tax Act, 1961 was repealed by section 536(1) of the Income-tax Act, 2025 (Act No. 30 of 2025), which came into force on 1 April 2026. The savings in section 536(2) keep the repealed Act alive for proceedings for earlier tax years. The successor to section 197 is section 395 of the Income-tax Act, 2025, and it has already been amended. In section 395 as it now stands, sub-section (1)(a) lets the payee apply to the Assessing Officer, (1)(b) requires the officer to be satisfied that “the total income of the payee justifies” the lower rate or nil, and (1)(c) binds the payer “when a certificate is issued under clause (b) or sub-section (6), as the case may be”. Those last words are new: footnote 90 records “Sub. by Act No. 4 of 2026, w.e.f. 1-4-2026” and sets out the prior clause (c), which knew only a certificate under clause (b). The sub-section (6) they now point to was inserted by the same Act from the same date (footnote 91): the application under (1)(a) “may also be filed before the prescribed income-tax authority, subject to such conditions as may be prescribed, and such authority on electronic verification of the contents of the application, may— (a) either issue a certificate for deduction of income-tax at lower rate or no deduction of income-tax; or (b) reject such application on account of non-fulfilment of the prescribed conditions or on account of the application being incomplete.” So from 1 April 2026 there are two issuing routes, not one, and a certificate issued by the prescribed authority binds the payer exactly as an Assessing Officer's does. Sub-section (5) gives the Assessing Officer power to cancel a certificate granted under sub-section (1) or (3) after a reasonable opportunity. The application is Form No. 128 under rule 213 of the Income-tax Rules, 2026, which covers both section 395(1) (deduction) and section 395(3) (collection). Under the 1961 Act that was already one form number under two rules — Form No. 13 under rule 28 for deduction, and Form No. 13 under rule 37G for collection, rule 37G reading “An application by the buyer or licensee or lessee for a certificate under sub-section (9) of section 206C shall be made in Form No. 13 electronically”. Form No. 128 carries the words “(Earlier Form No. 13)” on its face.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved.
Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.
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Handle my notice → Ask a CA on WhatsAppSection 197(1) lets the payee apply to the Assessing Officer for a certificate that the payer may deduct at a lower rate, or not at all. It is not open-ended: it works only for the sections named in it, and the Assessing Officer must be satisfied that “the total income of the recipient justifies” the lower rate. The list is sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195 — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 and 194Q by Act No. 15 of 2024 with effect from 1 October 2024. Section 197(2) then binds the payer: once a certificate is given, he deducts at the certified rate, or nothing, until the Assessing Officer cancels it. Section 197(2A) is the rule-making power, and the rules made under it are rule 28 (application in Form No. 13, filed electronically), rule 28AA (how the rate is worked out and how long the certificate lasts) and rule 28AB (a no-deduction certificate for trusts and other section 139(4C) filers). Nothing in the section or the rules confers a power to backdate a certificate, and in substance it operates forward: rule 28AA(4) sends it to the named deductor, who cannot un-deduct months already past. From 1 April 2026 this machinery is gone — the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025 and the successor is section 395 of the 2025 Act, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026, and from the same date section 395(6) lets that application go to a prescribed income-tax authority instead of the Assessing Officer. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 197, section 197(1), section Rule 28AA, section Rule 28, section Rule 28AB, section 206AA, section 206AA(1)(iii), section 197A, section 195, section 195(2), section 199, section 192, section 193, section 194, section 194A, section 194C, section 194D, section 194G, section 194H, section 194-I, section 194J, section 194K, section 194LA, section 194LBA, section 194LBB, section 194LBC, section 194M, section 194-O, section 194Q, section 201(1), section 201(1A) of the Income Tax Act 1961. It is reported as Section 197 of the Income-tax Act, 1961, as amended up to 2025. A lower-deduction certificate is the only lawful way to stop tax being withheld from you at a rate you do not owe. Everything else — asking the payer to deduct less, netting it off, arguing about it afterwards — puts the payer in default under section 201(1) and on the hook for interest under section 201(1A). Section 197(2) is what makes the certificate safe for the payer: he deducts at the certified rate until it is cancelled, and he is protected while he does, which is why rule 28AA(4) sends the certificate to him and not to you. The timing is where the money is lost. The certificate runs only for a period of the previous year specified in it, and it operates on what the deductor does next; it cannot reach deductions he has already made and paid over. Apply in November for a year that began in April and seven months of full-rate deductions are gone until your refund comes, so a section 197 application is an April job. From 1 April 2026 the application itself has changed: the 1961 Act is repealed, the certificate issues under section 395 of the Income-tax Act, 2025, the form is Form No. 128 under rule 213 of the Income-tax Rules, 2026, and section 395(6) now allows the application to go to a prescribed income-tax authority for electronic verification. A Form No. 13 filed for a period falling on or after 1 April 2026 is filed under a repealed provision. If it applies to you, the first step is this: Check first that your payment is in the section 197 list. As printed on the Year 2025 page the list is 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195. If your deduction is under section 194N or section 194B, there is no certificate to be had.
The operative text of section 197 of the Income-tax Act, 1961, as it stood for deductions up to 31 March 2026: “197. Certificate for deduction at lower rate. (1) Subject to rules made under sub-section (2A), where, in the case of any income of any person or sum payable to any person, income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. (2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. (3) [***]” Two footnote markers sit inside sub-section (1). Footnote 9, against “194LBA”, reads “Ins. by Act No. 08 of 2023, w.e.f. 1-4-2023.” Footnote 10, against “194Q”, reads “Ins. by Act No. 15 of 2024, w.e.f. 1-10-2024.” The published version immediately before it carries the same two footnotes in the same places, there numbered 11 and 12. The footnote that names the rules appears on the older published versions rather than the latest. One of them carries it as footnote 59a: “See rules 28(1), 28AA, 28AB and 29 and Form No. 13.” Two earlier versions carry the same note, as footnotes 48 and 30. The omitted sub-section (3) is explained in a footnote to the empty sub-section on one of the oldest published versions. The footnote numbering there is not stable between copies and is therefore not cited; the footnote text is: “Sub-section (3) omitted by the Finance Act, 1986, w.e.f. 1-4-1987. Prior to its omission, sub-section (3), as substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, stood as under: ‘(3) Where the principal officer of a company considers that, by reason of the provisions of section 80K, the whole or any portion of the dividend referred to in section 194 will be deductible in computing the total income of the recipient, he may, before paying the dividend to the shareholder or issuing any cheque or warrant in respect thereof, make an application to the Income-tax Officer to determine the appropriate proportion of the dividend to be deducted under the provisions of section 80K; and on such determination by the Income-tax Officer no tax shall be deducted on such proportionate amount.’” That pre-omission text does not rest on the footnote alone. The oldest published version of the section prints it as live section text, in the same words, together with the pre-1992 sub-section (1): “197. (1) Where, in the case of any income of any person other than a company— (a) income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194A and 195, (b) being a non-resident, income-tax is required to be deducted at the time of payment at the rates in force under the provisions of section 194, the Income-tax Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax as the case may be, the Income-tax Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate.” THE RULES Rule 28, headed “Application for grant of certificates for deduction of income-tax at any lower rates or no deduction of income-tax”: “(1) An application by a person for grant of a certificate for the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, under sub-section (1) of section 197 shall be made in Form No. 13 electronically, — (i) under digital signature; or (ii) through electronic verification code. (2) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall lay down procedures, formats and standards for ensuring secure capture and transmission of data and uploading of documents and the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the furnishing of Form No.13.” Footnote 92 to that rule: “Substituted by the IT (Eleventh Amdt.) Rules, 2018, w.e.f. 25-10-2018.” Rule 28AA, headed “Certificate for deduction at lower rates or no deduction of tax from income other than dividends”: “(1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax. (2) The existing and estimated liability referred to in sub-rule (1) shall be determined by the Assessing Officer after taking into consideration the following:— (i) tax payable on estimated income of the previous year relevant to the assessment year; (ii) tax payable on the assessed or returned or estimated income, as the case may be, of last four previous years; (iii) existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957; (iv) advance tax payment, tax deducted at source and tax collected at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28; (3) The certificate shall be valid for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period. (4) The certificate for deduction of tax at any lower rates or no deduction of tax, as the case may be, shall be issued direct to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate: Provided that where the number of persons responsible for deducting the tax is likely to exceed one hundred and the details of such persons are not available at the time of making application with the person making such application, the certificate for deduction of tax at lower rate may be issued to the person who made an application for issue of such certificate, authorising him to receive income or sum after deduction of tax at lower rate. (5) The certificates referred to in sub-rule (4) shall be valid only with regard to the person responsible for deducting the tax and named therein and certificate referred to in proviso to the sub-rule (4) shall be valid with regard to the person who made an application for issue of such certificate. (6) The Principal Director General or Director General of Income-tax (Systems) shall lay down procedures, formats and standards for issuance of certificates … and shall be responsible for evolving and implementing appropriate security, archival and retrieval policies.” Clauses (v) and (vi) of sub-rule (2) are shown as omitted. The footnotes to that rule are 93 (“Sub. for ‘income, as the case may be, of the last three’ by the IT (Eleventh Amendment) Rules, 2018, w.e.f. 25-10-2018”), 94 and 96 (insertion and substitution by the same amendment rules and date) and 95 (“Omitted by the IT (Eleventh Amendment) Rules, 2018, w.e.f. 25-10-2018”). Rule 28AB, headed “Certificate of no deduction of tax in case of certain entities”, lets a person in receipt of income from property held under trust who claims exemption under section 11 or section 12, and a person required to file a return under section 139(4C) (a scientific research association, news agency, association or institution, fund or trust or university or other educational institution, hospital or other medical institution or trade union), apply for a certificate under section 197(1) to receive income without deduction of tax. The conditions in sub-rule (2) are that the returns of income for all assessment years already due have been furnished, and that the entity “is for the time being approved for the purpose of exemption from income-tax”. Sub-rule (4) requires the Assessing Officer to be satisfied that the conditions are met and that “the issue of any such certificate will not be prejudicial to the interests of revenue”. Sub-rule (6): “The certificate shall be valid for the financial year specified therein unless it is cancelled by the Assessing Officer at any time before the expiry of the said financial year.” THE PAN BAR Section 206AA, sub-section (4): “No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.” Sub-section (1) of the same section opens “Notwithstanding anything contained in any other provisions of this Act” and sets the floor at the higher of the rate in the relevant provision, the rate or rates in force, and twenty per cent, where the deductee does not furnish his PAN; two provisos cut that twenty per cent to five per cent for section 194-O and for section 194Q. The matter was decided on 2024-10-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. As at 23 September 2026, and for deductions made up to 31 March 2026: Section 197 does three things. It gives the payee — not the payer — a right to apply; it gives the Assessing Officer a power to certify a lower rate or nil, conditioned on his satisfaction that “the total income of the recipient justifies” it; and it makes the certificate binding on the payer until cancelled. It is a closed list. The section works only where tax “is required to be deducted … under the provisions of” one of the sections it names. The list has grown, and the additions are the amendment history of the section. As it now stands the list is: 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195. Reading the vintages back: — 194Q was added by Act No. 15 of 2024 with effect from 1 October 2024 (footnote 10). The published version before that amendment still ends the list “194M, 194-O and 195”; the next one already carries 194Q. — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 (footnote 9). The published version before that date does not have it; the next one does, with footnote 60 reading “Inserted by the Finance Act, 2023, w.e.f. 1-4-2023.” — 194M and 194-O were added by Act No. 23 of 2019 and Act No. 12 of 2020 (footnotes 31 and 32). The published versions before those dates end the list “194LBB, 194LBC and 195”. Two sections are conspicuously absent and their absence is the point. Section 194N (cash withdrawal) and section 194B are not in the list, so no section 197 certificate can be issued for them. Neither is section 206C, which is a collection provision and has no place in a deduction section. The test is the recipient's total income, not the payer's convenience. Rule 28AA(1) restates it as “existing and estimated tax liability” and rule 28AA(2) fixes the four things the Assessing Officer must take into account: tax payable on the estimated income of the previous year; tax payable on the assessed, returned or estimated income of the last four previous years; existing liability under the Income-tax Act, 1961 and the Wealth-tax Act, 1957; and advance tax, tax deducted at source and tax collected at source for the year till the date of the application. “Last four previous years” is itself an amendment: footnote 93 records that it was substituted for “the last three” by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018, the same amendment that put the whole process online. The certificate is time-bound and payer-specific. Rule 28AA(3): valid “for such period of the previous year as may be specified in the certificate”. Rule 28AA(4): issued direct to the deductor, under advice to the applicant — the payee does not receive it and hand it over. Rule 28AA(5): valid only for the deductor named in it. The single exception is the proviso to rule 28AA(4): where the deductors are likely to exceed one hundred and their details are not available when the application is made, the certificate may be issued to the applicant himself, authorising him to receive the income after deduction at the lower rate; sub-rule (5) then makes that certificate valid with regard to the applicant. The application is Form No. 13, filed electronically under digital signature or electronic verification code — rule 28(1), substituted by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018. The departmental help page “Certificate of lower/no deduction of tax at source” states that Form No. 13 is filed through the TRACES portal and that PAN is mandatory. Rule 28AB is a separate, narrower route: a nil-deduction certificate for an exempt entity — a section 11 or 12 claimant, or a section 139(4C) filer — granted only if all due returns are in, the entity is for the time being approved for exemption, and the certificate will not prejudice the revenue. It runs for the financial year specified, not for a part of the previous year. Section 197 is not section 195(2) or section 195(3). Section 195(2) is the payer's application: where the person paying a non-resident “considers that the whole of such sum would not be income chargeable in the case of the recipient”, he asks the Assessing Officer to determine “the appropriate proportion of such sum so chargeable”, and deducts only on that proportion. It is about how much of the remittance is income, not about the recipient's tax rate. Section 195(3) is the non-resident payee's own application for a certificate to receive the sum without deduction, granted subject to rules made under section 195(5). Section 197 overlaps with section 195 because section 195 is in the section 197 list — so a non-resident payee has a choice of route, and the resident payer has only section 195(2). Section 197 is not section 197A either. Section 197A is self-service: the payee files a declaration with the payer and no Assessing Officer is involved. It is available only to the persons and for the sections named in it, and only where the tax on estimated total income will be nil. Section 197 is discretionary, officer-granted, and can certify a lower rate as well as nil. On section 206AA, start with what the two sub-sections actually turn on, because they turn on different acts. Section 206AA(4) bars the grant: no certificate under section 197 may be given unless the application made to the Assessing Officer contains the applicant's PAN. Section 206AA(1) bites on something else — the deductee failing to furnish his PAN “to the person responsible for deducting such tax”. Putting a PAN on an application to the Assessing Officer is not the same act as giving it to the payer. So the question “can a section 197 certificate be issued below the section 206AA rate for a payee with no PAN” has a clean answer: no certificate can be issued at all, because section 206AA(4) stops it at the door. But the further question — what if a certificate holder's deductor does not have the PAN on file — is not answered by that. What answers it in practice is rule 28AA(4) and (5): the certificate goes direct to the named deductor, so he has the PAN-bearing certificate in his hands. Where that has not happened, section 206AA(1) opens “Notwithstanding anything contained in any other provisions of this Act”, and on those words the twenty per cent floor would override the certificate. The certificate is not a substitute for the payee giving his PAN to the payer. On retrospectivity, neither section 197 nor the rules confer a power to backdate, but neither of the two obvious textual pointers is as strong as it first looks. Section 197(2)'s “until such certificate is cancelled” fixes when the payer's duty ends, not when it begins. Rule 28AA(3)'s “such period of the previous year as may be specified in the certificate” is neutral on whether the specified period may already have begun. What actually carries the weight is rule 28AA(4) and (5): the certificate issues to the named deductor and operates on what he does, and a deductor cannot un-deduct months already past and already paid over. So a certificate is in substance prospective, and nothing in section 197, rule 28, rule 28AA or rule 28AB addresses deductions already made or undoes them. Tax already deducted and paid over stays deducted; the payee takes credit for it under section 199 and recovers any excess as a refund when the return is processed. This is the position on the text alone; the judgments in the library on section 197 certificates have not been read against it. What changed, and when: — 1 April 1987: sub-section (3), the section 80K dividend determination, was omitted by the Finance Act, 1986 (footnote to the empty sub-section; the same sub-section is live text on the oldest published version). The sub-section number has stood empty since. — 1 June 1992: the section was recast by the Finance Act, 1992 into its present shape, replacing a lettered structure that applied only to “any income of any person other than a company” and ran on sections 192, 193, 194A and 195 (an older published version sets out the pre-1992 text in a footnote; the oldest prints it as live text). — 1 September 2019 and 1 April 2020: sections 194M and 194-O brought in by Act No. 23 of 2019 and Act No. 12 of 2020. — 25 October 2018: the IT (Eleventh Amendment) Rules, 2018 moved Form No. 13 online, lengthened the look-back in rule 28AA(2)(ii) from three previous years to four, and omitted clauses (v) and (vi) of that sub-rule. — 1 April 2023: section 194LBA added by Act No. 8 of 2023. — 1 October 2024: section 194Q added by Act No. 15 of 2024. This is the latest change and it is why the current text is dated from that day. — Neither the Finance Bill, 2025 (Bill No. 14 of 2025) nor the Finance Bill, 2026 (Bill No. 3 of 2026) contains a clause amending section 197 of the 1961 Act. That is unsurprising and not much comfort: the Finance Bill, 2026 amends the successor instead, at clause 74 “Amendment of section 395”, and the enacted result is described below. — 1 April 2026: the Income-tax Act, 1961 was repealed by section 536(1) of the Income-tax Act, 2025 (Act No. 30 of 2025), which came into force on 1 April 2026. The savings in section 536(2) keep the repealed Act alive for proceedings for earlier tax years. The successor to section 197 is section 395 of the Income-tax Act, 2025, and it has already been amended. In section 395 as it now stands, sub-section (1)(a) lets the payee apply to the Assessing Officer, (1)(b) requires the officer to be satisfied that “the total income of the payee justifies” the lower rate or nil, and (1)(c) binds the payer “when a certificate is issued under clause (b) or sub-section (6), as the case may be”. Those last words are new: footnote 90 records “Sub. by Act No. 4 of 2026, w.e.f. 1-4-2026” and sets out the prior clause (c), which knew only a certificate under clause (b). The sub-section (6) they now point to was inserted by the same Act from the same date (footnote 91): the application under (1)(a) “may also be filed before the prescribed income-tax authority, subject to such conditions as may be prescribed, and such authority on electronic verification of the contents of the application, may— (a) either issue a certificate for deduction of income-tax at lower rate or no deduction of income-tax; or (b) reject such application on account of non-fulfilment of the prescribed conditions or on account of the application being incomplete.” So from 1 April 2026 there are two issuing routes, not one, and a certificate issued by the prescribed authority binds the payer exactly as an Assessing Officer's does. Sub-section (5) gives the Assessing Officer power to cancel a certificate granted under sub-section (1) or (3) after a reasonable opportunity. The application is Form No. 128 under rule 213 of the Income-tax Rules, 2026, which covers both section 395(1) (deduction) and section 395(3) (collection). Under the 1961 Act that was already one form number under two rules — Form No. 13 under rule 28 for deduction, and Form No. 13 under rule 37G for collection, rule 37G reading “An application by the buyer or licensee or lessee for a certificate under sub-section (9) of section 206C shall be made in Form No. 13 electronically”. Form No. 128 carries the words “(Earlier Form No. 13)” on its face.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be."
It was decided by the CBDT Circulars & Instructions on 2024-10-01 and is reported as Section 197 of the Income-tax Act, 1961, as amended up to 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 197, section 197(1), section Rule 28AA, section Rule 28, section Rule 28AB, section 206AA, section 206AA(1)(iii), section 197A, section 195, section 195(2), section 199, section 192, section 193, section 194, section 194A, section 194C, section 194D, section 194G, section 194H, section 194-I, section 194J, section 194K, section 194LA, section 194LBA, section 194LBB, section 194LBC, section 194M, section 194-O, section 194Q, section 201(1), section 201(1A), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. As at 23 September 2026, and for deductions made up to 31 March 2026: Section 197 does three things. It gives the payee — not the payer — a right to apply; it gives the Assessing Officer a power to certify a lower rate or nil, conditioned on his satisfaction that “the total income of the recipient justifies” it; and it makes the certificate binding on the payer until cancelled. It is a closed list. The section works only where tax “is required to be deducted … under the provisions of” one of the sections it names. The list has grown, and the additions are the amendment history of the section. As it now stands the list is: 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195. Reading the vintages back: — 194Q was added by Act No. 15 of 2024 with effect from 1 October 2024 (footnote 10). The published version before that amendment still ends the list “194M, 194-O and 195”; the next one already carries 194Q. — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 (footnote 9). The published version before that date does not have it; the next one does, with footnote 60 reading “Inserted by the Finance Act, 2023, w.e.f. 1-4-2023.” — 194M and 194-O were added by Act No. 23 of 2019 and Act No. 12 of 2020 (footnotes 31 and 32). The published versions before those dates end the list “194LBB, 194LBC and 195”. Two sections are conspicuously absent and their absence is the point. Section 194N (cash withdrawal) and section 194B are not in the list, so no section 197 certificate can be issued for them. Neither is section 206C, which is a collection provision and has no place in a deduction section. The test is the recipient's total income, not the payer's convenience. Rule 28AA(1) restates it as “existing and estimated tax liability” and rule 28AA(2) fixes the four things the Assessing Officer must take into account: tax payable on the estimated income of the previous year; tax payable on the assessed, returned or estimated income of the last four previous years; existing liability under the Income-tax Act, 1961 and the Wealth-tax Act, 1957; and advance tax, tax deducted at source and tax collected at source for the year till the date of the application. “Last four previous years” is itself an amendment: footnote 93 records that it was substituted for “the last three” by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018, the same amendment that put the whole process online. The certificate is time-bound and payer-specific. Rule 28AA(3): valid “for such period of the previous year as may be specified in the certificate”. Rule 28AA(4): issued direct to the deductor, under advice to the applicant — the payee does not receive it and hand it over. Rule 28AA(5): valid only for the deductor named in it. The single exception is the proviso to rule 28AA(4): where the deductors are likely to exceed one hundred and their details are not available when the application is made, the certificate may be issued to the applicant himself, authorising him to receive the income after deduction at the lower rate; sub-rule (5) then makes that certificate valid with regard to the applicant. The application is Form No. 13, filed electronically under digital signature or electronic verification code — rule 28(1), substituted by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018. The departmental help page “Certificate of lower/no deduction of tax at source” states that Form No. 13 is filed through the TRACES portal and that PAN is mandatory. Rule 28AB is a separate, narrower route: a nil-deduction certificate for an exempt entity — a section 11 or 12 claimant, or a section 139(4C) filer — granted only if all due returns are in, the entity is for the time being approved for exemption, and the certificate will not prejudice the revenue. It runs for the financial year specified, not for a part of the previous year. Section 197 is not section 195(2) or section 195(3). Section 195(2) is the payer's application: where the person paying a non-resident “considers that the whole of such sum would not be income chargeable in the case of the recipient”, he asks the Assessing Officer to determine “the appropriate proportion of such sum so chargeable”, and deducts only on that proportion. It is about how much of the remittance is income, not about the recipient's tax rate. Section 195(3) is the non-resident payee's own application for a certificate to receive the sum without deduction, granted subject to rules made under section 195(5). Section 197 overlaps with section 195 because section 195 is in the section 197 list — so a non-resident payee has a choice of route, and the resident payer has only section 195(2). Section 197 is not section 197A either. Section 197A is self-service: the payee files a declaration with the payer and no Assessing Officer is involved. It is available only to the persons and for the sections named in it, and only where the tax on estimated total income will be nil. Section 197 is discretionary, officer-granted, and can certify a lower rate as well as nil. On section 206AA, start with what the two sub-sections actually turn on, because they turn on different acts. Section 206AA(4) bars the grant: no certificate under section 197 may be given unless the application made to the Assessing Officer contains the applicant's PAN. Section 206AA(1) bites on something else — the deductee failing to furnish his PAN “to the person responsible for deducting such tax”. Putting a PAN on an application to the Assessing Officer is not the same act as giving it to the payer. So the question “can a section 197 certificate be issued below the section 206AA rate for a payee with no PAN” has a clean answer: no certificate can be issued at all, because section 206AA(4) stops it at the door. But the further question — what if a certificate holder's deductor does not have the PAN on file — is not answered by that. What answers it in practice is rule 28AA(4) and (5): the certificate goes direct to the named deductor, so he has the PAN-bearing certificate in his hands. Where that has not happened, section 206AA(1) opens “Notwithstanding anything contained in any other provisions of this Act”, and on those words the twenty per cent floor would override the certificate. The certificate is not a substitute for the payee giving his PAN to the payer. On retrospectivity, neither section 197 nor the rules confer a power to backdate, but neither of the two obvious textual pointers is as strong as it first looks. Section 197(2)'s “until such certificate is cancelled” fixes when the payer's duty ends, not when it begins. Rule 28AA(3)'s “such period of the previous year as may be specified in the certificate” is neutral on whether the specified period may already have begun. What actually carries the weight is rule 28AA(4) and (5): the certificate issues to the named deductor and operates on what he does, and a deductor cannot un-deduct months already past and already paid over. So a certificate is in substance prospective, and nothing in section 197, rule 28, rule 28AA or rule 28AB addresses deductions already made or undoes them. Tax already deducted and paid over stays deducted; the payee takes credit for it under section 199 and recovers any excess as a refund when the return is processed. This is the position on the text alone; the judgments in the library on section 197 certificates have not been read against it. What changed, and when: — 1 April 1987: sub-section (3), the section 80K dividend determination, was omitted by the Finance Act, 1986 (footnote to the empty sub-section; the same sub-section is live text on the oldest published version). The sub-section number has stood empty since. — 1 June 1992: the section was recast by the Finance Act, 1992 into its present shape, replacing a lettered structure that applied only to “any income of any person other than a company” and ran on sections 192, 193, 194A and 195 (an older published version sets out the pre-1992 text in a footnote; the oldest prints it as live text). — 1 September 2019 and 1 April 2020: sections 194M and 194-O brought in by Act No. 23 of 2019 and Act No. 12 of 2020. — 25 October 2018: the IT (Eleventh Amendment) Rules, 2018 moved Form No. 13 online, lengthened the look-back in rule 28AA(2)(ii) from three previous years to four, and omitted clauses (v) and (vi) of that sub-rule. — 1 April 2023: section 194LBA added by Act No. 8 of 2023. — 1 October 2024: section 194Q added by Act No. 15 of 2024. This is the latest change and it is why the current text is dated from that day. — Neither the Finance Bill, 2025 (Bill No. 14 of 2025) nor the Finance Bill, 2026 (Bill No. 3 of 2026) contains a clause amending section 197 of the 1961 Act. That is unsurprising and not much comfort: the Finance Bill, 2026 amends the successor instead, at clause 74 “Amendment of section 395”, and the enacted result is described below. — 1 April 2026: the Income-tax Act, 1961 was repealed by section 536(1) of the Income-tax Act, 2025 (Act No. 30 of 2025), which came into force on 1 April 2026. The savings in section 536(2) keep the repealed Act alive for proceedings for earlier tax years. The successor to section 197 is section 395 of the Income-tax Act, 2025, and it has already been amended. In section 395 as it now stands, sub-section (1)(a) lets the payee apply to the Assessing Officer, (1)(b) requires the officer to be satisfied that “the total income of the payee justifies” the lower rate or nil, and (1)(c) binds the payer “when a certificate is issued under clause (b) or sub-section (6), as the case may be”. Those last words are new: footnote 90 records “Sub. by Act No. 4 of 2026, w.e.f. 1-4-2026” and sets out the prior clause (c), which knew only a certificate under clause (b). The sub-section (6) they now point to was inserted by the same Act from the same date (footnote 91): the application under (1)(a) “may also be filed before the prescribed income-tax authority, subject to such conditions as may be prescribed, and such authority on electronic verification of the contents of the application, may— (a) either issue a certificate for deduction of income-tax at lower rate or no deduction of income-tax; or (b) reject such application on account of non-fulfilment of the prescribed conditions or on account of the application being incomplete.” So from 1 April 2026 there are two issuing routes, not one, and a certificate issued by the prescribed authority binds the payer exactly as an Assessing Officer's does. Sub-section (5) gives the Assessing Officer power to cancel a certificate granted under sub-section (1) or (3) after a reasonable opportunity. The application is Form No. 128 under rule 213 of the Income-tax Rules, 2026, which covers both section 395(1) (deduction) and section 395(3) (collection). Under the 1961 Act that was already one form number under two rules — Form No. 13 under rule 28 for deduction, and Form No. 13 under rule 37G for collection, rule 37G reading “An application by the buyer or licensee or lessee for a certificate under sub-section (9) of section 206C shall be made in Form No. 13 electronically”. Form No. 128 carries the words “(Earlier Form No. 13)” on its face. It arises in TDS Defaults, Refunds, Interest & Condonation and How Tax Law Is Read matters, on section 197, section 197(1), section Rule 28AA, section Rule 28, section Rule 28AB, section 206AA, section 206AA(1)(iii), section 197A, section 195, section 195(2), section 199, section 192, section 193, section 194, section 194A, section 194C, section 194D, section 194G, section 194H, section 194-I, section 194J, section 194K, section 194LA, section 194LBA, section 194LBB, section 194LBC, section 194M, section 194-O, section 194Q, section 201(1), section 201(1A) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Apply before the year's deductions start, not after they hurt. The certificate is issued to your deductor and works on what he does next; nothing in the section or the rules touches deductions he has already made and paid over. File Form No. 13 electronically, under digital signature or through electronic verification code, as rule 28(1) requires. The departmental help page directs the filing through TRACES. Put your PAN on the application. Section 206AA(4) bars the grant of any section 197 certificate unless the application contains it — this is not a formality the Assessing Officer can waive. Assemble what rule 28AA(2) tells the Assessing Officer to look at, and hand it to him unasked: the computation of estimated income for the year, the assessed or returned income of the last four previous years, a statement of any existing demand under the Income-tax Act, 1961 or the Wealth-tax Act, 1957, and the advance tax, TDS and TCS already credited for the year to the date of the application. An application that does not address those four heads is asking the officer to do your work. Name your deductors. The certificate is issued to the deductor and is valid only for the deductor named in it (rule 28AA(4) and (5)). If you expect more than one hundred deductors and cannot list them, say so and ask for a certificate under the proviso to rule 28AA(4), issued to you. If you are a trust or a section 139(4C) entity, use rule 28AB instead. Get every overdue return filed first — sub-rule (2)(i) makes that a condition, not a preference — and be ready to show that your approval for exemption is current. If you are paying a non-resident and your point is that only part of the remittance is chargeable, that is section 195(2), which is your application as payer, not section 197, which is the payee's. Do not use one to do the other's work. For any period on or after 1 April 2026, apply under section 395 of the Income-tax Act, 2025 in Form No. 128 under rule 213 of the Income-tax Rules, 2026 — to the Assessing Officer under section 395(1)(a), or to the prescribed income-tax authority under section 395(6), which may verify electronically and either issue or reject. Section 197 and Form No. 13 no longer run.
Still good law. The text is taken from the most recent published version of section 197 of the Income-tax Act, 1961. Older published versions of the section still print the pre-2019 list of sections, and a reader who picks one of them up will get the list wrong. Ten published versions of the section have been read, spanning 1971 to 2025. Sub-sections (1), (2) and (2A) read identically across the four most recent except for the two additions to the list of sections, and each addition carries a footnote naming the amending Act and date and first appears in exactly the version that footnote predicts: the version before the 2024 amendment still ends “194M, 194-O and 195”, the next already carries 194Q. The pre-1992 text and the pre-1987 sub-section (3) do not rest on a footnote — the oldest version prints both as live text. Neither the Finance Bill, 2025 nor the Finance Bill, 2026 amends section 197 of the 1961 Act. Four limits on reliance. First, rule 28AA as it stood before 25 October 2018 has not been read, because only the current text of that rule is published; no earlier formula for fixing the rate is stated here, only the current test of “existing and estimated tax liability” on the four factors in sub-rule (2). Second, the section 197 footnote directs the reader to “rules 28(1), 28AA, 28AB and 29”, but no rule 29 of the Income-tax Rules, 1962 has been located; rule 29 is named here only as that footnote names it, and nothing is said about its content. Third, whether a certificate may issue with retrospective effect is answered here from the text alone — no CBDT circular or instruction has been traced, and the judgments in the library on section 197 certificates have not been read against this record. Fourth, section 199 is named for the proposition that credit for tax already deducted is taken under it; its marginal note was verified, but its current text was not pinned down and is not quoted. This describes a repealed Act. Section 536(1) of the Income-tax Act, 2025 repealed the Income-tax Act, 1961 from 1 April 2026, saving proceedings for earlier tax years. Section 197 is good law for deductions up to 31 March 2026 and spent for anything later. The successor, section 395 of the 2025 Act, is stated from its current published text and has itself been amended by Act No. 4 of 2026 from 1 April 2026. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The text is taken from the most recent published version of section 197 and checked word for word against the three published versions before it. The footnotes reproduced in the body are quoted from the versions they belong to. Two points on the sourcing that a reader should know. The footnote numbering on one of the oldest published versions is not stable — the same two notes appear under different numbers in different copies — so its footnotes are quoted here by their text and their position, never by number. The substance does not depend on them: the oldest version prints the pre-1992 sub-section (1) and the pre-1987 sub-section (3) as live section text in the same words. The footnote numbers cited by number — 9 and 10, 11 and 12, 59a and 60, 48 and 49, 30, 31 and 32, together with 92 in rule 28 and 93 to 96 in rule 28AA — have each been read off the version they are attributed to. Work still outstanding on this record: — The history of rule 28AA before the IT (Eleventh Amendment) Rules, 2018 is not covered, because only the current text of the rule is published. It would have to come from the amending notification itself. — Rule 29 of the Income-tax Rules, 1962 has not been located and is named here only as the section 197 footnote names it. — Notification No. 2 of 2023 of the Directorate of Income Tax (Systems), which lays down the procedure for an application under the proviso to rule 28AA(4) through TRACES, has not been read and nothing here depends on it. — The current text of section 199 is not quoted, only its marginal note. — The judgments in the library on section 197 certificates have not been read against this statement of the text. Where a judgment and this page appear to differ, the judgment governs. — Section 395 of the Income-tax Act, 2025 is the live provision from 1 April 2026 and deserves a record of its own; it is summarised here only so far as is needed to mark the boundary of this one. One caution on how this record should be used. Everything stated here is the position on the text of the section and the rules. It is not a statement of how the Assessing Officer's discretion has been reviewed, of what amounts to a failure to apply mind in rejecting an application, or of when a certificate may be cancelled; those are questions the judgments answer, and this page does not. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
As at 23 September 2026, and for deductions made up to 31 March 2026: Section 197 does three things. It gives the payee — not the payer — a right to apply; it gives the Assessing Officer a power to certify a lower rate or nil, conditioned on his satisfaction that “the total income of the recipient justifies” it; and it makes the certificate binding on the payer until cancelled. It is a closed list. The section works only where tax “is required to be deducted … under the provisions of” one of the sections it names. The list has grown, and the additions are the amendment history of the section. As it now stands the list is: 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195. Reading the vintages back: — 194Q was added by Act No. 15 of 2024 with effect from 1 October 2024 (footnote 10). The published version before that amendment still ends the list “194M, 194-O and 195”; the next one already carries 194Q. — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 (footnote 9). The published version before that date does not have it; the next one does, with footnote 60 reading “Inserted by the Finance Act, 2023, w.e.f. 1-4-2023.” — 194M and 194-O were added by Act No. 23 of 2019 and Act No. 12 of 2020 (footnotes 31 and 32). The published versions before those dates end the list “194LBB, 194LBC and 195”. Two sections are conspicuously absent and their absence is the point. Section 194N (cash withdrawal) and section 194B are not in the list, so no section 197 certificate can be issued for them. Neither is section 206C, which is a collection provision and has no place in a deduction section. The test is the recipient's total income, not the payer's convenience. Rule 28AA(1) restates it as “existing and estimated tax liability” and rule 28AA(2) fixes the four things the Assessing Officer must take into account: tax payable on the estimated income of the previous year; tax payable on the assessed, returned or estimated income of the last four previous years; existing liability under the Income-tax Act, 1961 and the Wealth-tax Act, 1957; and advance tax, tax deducted at source and tax collected at source for the year till the date of the application. “Last four previous years” is itself an amendment: footnote 93 records that it was substituted for “the last three” by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018, the same amendment that put the whole process online. The certificate is time-bound and payer-specific. Rule 28AA(3): valid “for such period of the previous year as may be specified in the certificate”. Rule 28AA(4): issued direct to the deductor, under advice to the applicant — the payee does not receive it and hand it over. Rule 28AA(5): valid only for the deductor named in it. The single exception is the proviso to rule 28AA(4): where the deductors are likely to exceed one hundred and their details are not available when the application is made, the certificate may be issued to the applicant himself, authorising him to receive the income after deduction at the lower rate; sub-rule (5) then makes that certificate valid with regard to the applicant. The application is Form No. 13, filed electronically under digital signature or electronic verification code — rule 28(1), substituted by the IT (Eleventh Amendment) Rules, 2018 with effect from 25 October 2018. The departmental help page “Certificate of lower/no deduction of tax at source” states that Form No. 13 is filed through the TRACES portal and that PAN is mandatory. Rule 28AB is a separate, narrower route: a nil-deduction certificate for an exempt entity — a section 11 or 12 claimant, or a section 139(4C) filer — granted only if all due returns are in, the entity is for the time being approved for exemption, and the certificate will not prejudice the revenue. It runs for the financial year specified, not for a part of the previous year. Section 197 is not section 195(2) or section 195(3). Section 195(2) is the payer's application: where the person paying a non-resident “considers that the whole of such sum would not be income chargeable in the case of the recipient”, he asks the Assessing Officer to determine “the appropriate proportion of such sum so chargeable”, and deducts only on that proportion. It is about how much of the remittance is income, not about the recipient's tax rate. Section 195(3) is the non-resident payee's own application for a certificate to receive the sum without deduction, granted subject to rules made under section 195(5). Section 197 overlaps with section 195 because section 195 is in the section 197 list — so a non-resident payee has a choice of route, and the resident payer has only section 195(2). Section 197 is not section 197A either. Section 197A is self-service: the payee files a declaration with the payer and no Assessing Officer is involved. It is available only to the persons and for the sections named in it, and only where the tax on estimated total income will be nil. Section 197 is discretionary, officer-granted, and can certify a lower rate as well as nil. On section 206AA, start with what the two sub-sections actually turn on, because they turn on different acts. Section 206AA(4) bars the grant: no certificate under section 197 may be given unless the application made to the Assessing Officer contains the applicant's PAN. Section 206AA(1) bites on something else — the deductee failing to furnish his PAN “to the person responsible for deducting such tax”. Putting a PAN on an application to the Assessing Officer is not the same act as giving it to the payer. So the question “can a section 197 certificate be issued below the section 206AA rate for a payee with no PAN” has a clean answer: no certificate can be issued at all, because section 206AA(4) stops it at the door. But the further question — what if a certificate holder's deductor does not have the PAN on file — is not answered by that. What answers it in practice is rule 28AA(4) and (5): the certificate goes direct to the named deductor, so he has the PAN-bearing certificate in his hands. Where that has not happened, section 206AA(1) opens “Notwithstanding anything contained in any other provisions of this Act”, and on those words the twenty per cent floor would override the certificate. The certificate is not a substitute for the payee giving his PAN to the payer. On retrospectivity, neither section 197 nor the rules confer a power to backdate, but neither of the two obvious textual pointers is as strong as it first looks. Section 197(2)'s “until such certificate is cancelled” fixes when the payer's duty ends, not when it begins. Rule 28AA(3)'s “such period of the previous year as may be specified in the certificate” is neutral on whether the specified period may already have begun. What actually carries the weight is rule 28AA(4) and (5): the certificate issues to the named deductor and operates on what he does, and a deductor cannot un-deduct months already past and already paid over. So a certificate is in substance prospective, and nothing in section 197, rule 28, rule 28AA or rule 28AB addresses deductions already made or undoes them. Tax already deducted and paid over stays deducted; the payee takes credit for it under section 199 and recovers any excess as a refund when the return is processed. This is the position on the text alone; the judgments in the library on section 197 certificates have not been read against it. What changed, and when: — 1 April 1987: sub-section (3), the section 80K dividend determination, was omitted by the Finance Act, 1986 (footnote to the empty sub-section; the same sub-section is live text on the oldest published version). The sub-section number has stood empty since. — 1 June 1992: the section was recast by the Finance Act, 1992 into its present shape, replacing a lettered structure that applied only to “any income of any person other than a company” and ran on sections 192, 193, 194A and 195 (an older published version sets out the pre-1992 text in a footnote; the oldest prints it as live text). — 1 September 2019 and 1 April 2020: sections 194M and 194-O brought in by Act No. 23 of 2019 and Act No. 12 of 2020. — 25 October 2018: the IT (Eleventh Amendment) Rules, 2018 moved Form No. 13 online, lengthened the look-back in rule 28AA(2)(ii) from three previous years to four, and omitted clauses (v) and (vi) of that sub-rule. — 1 April 2023: section 194LBA added by Act No. 8 of 2023. — 1 October 2024: section 194Q added by Act No. 15 of 2024. This is the latest change and it is why the current text is dated from that day. — Neither the Finance Bill, 2025 (Bill No. 14 of 2025) nor the Finance Bill, 2026 (Bill No. 3 of 2026) contains a clause amending section 197 of the 1961 Act. That is unsurprising and not much comfort: the Finance Bill, 2026 amends the successor instead, at clause 74 “Amendment of section 395”, and the enacted result is described below. — 1 April 2026: the Income-tax Act, 1961 was repealed by section 536(1) of the Income-tax Act, 2025 (Act No. 30 of 2025), which came into force on 1 April 2026. The savings in section 536(2) keep the repealed Act alive for proceedings for earlier tax years. The successor to section 197 is section 395 of the Income-tax Act, 2025, and it has already been amended. In section 395 as it now stands, sub-section (1)(a) lets the payee apply to the Assessing Officer, (1)(b) requires the officer to be satisfied that “the total income of the payee justifies” the lower rate or nil, and (1)(c) binds the payer “when a certificate is issued under clause (b) or sub-section (6), as the case may be”. Those last words are new: footnote 90 records “Sub. by Act No. 4 of 2026, w.e.f. 1-4-2026” and sets out the prior clause (c), which knew only a certificate under clause (b). The sub-section (6) they now point to was inserted by the same Act from the same date (footnote 91): the application under (1)(a) “may also be filed before the prescribed income-tax authority, subject to such conditions as may be prescribed, and such authority on electronic verification of the contents of the application, may— (a) either issue a certificate for deduction of income-tax at lower rate or no deduction of income-tax; or (b) reject such application on account of non-fulfilment of the prescribed conditions or on account of the application being incomplete.” So from 1 April 2026 there are two issuing routes, not one, and a certificate issued by the prescribed authority binds the payer exactly as an Assessing Officer's does. Sub-section (5) gives the Assessing Officer power to cancel a certificate granted under sub-section (1) or (3) after a reasonable opportunity. The application is Form No. 128 under rule 213 of the Income-tax Rules, 2026, which covers both section 395(1) (deduction) and section 395(3) (collection). Under the 1961 Act that was already one form number under two rules — Form No. 13 under rule 28 for deduction, and Form No. 13 under rule 37G for collection, rule 37G reading “An application by the buyer or licensee or lessee for a certificate under sub-section (9) of section 206C shall be made in Form No. 13 electronically”. Form No. 128 carries the words “(Earlier Form No. 13)” on its face.
TaxSphere, “Statutory position — s.197: the Assessing Officer may certify a lower rate, or nil, for a listed section, but only on the payee's application and only for a period of the previous year — the 1961 Act position, for deductions up to 31 March 2026”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-197-the-lower-or-nil-deduction-certificate-and-rule-28aa/ (validity last checked 2026-09-23)
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My bank has deducted tax on my fixed deposit interest and I was told the limit had gone up. My father is a senior citizen and his bank deducted too. There is also a loan I took from a friend on which I pay interest, and a co-operative society that pays me interest on a deposit. Who exactly has to deduct under section 194A, on what amount, and what are the limits as they stand now?
My income is below the taxable limit and I filed Form 15G, but the finance company says it cannot act on it without a PAN. Can section 206AA be applied to me?
I am an individual paying Rs 70,000 a month rent, and separately I have paid an interior contractor Rs 62 lakh for my own house. When exactly do I deduct, how much, and do I need a TAN?
I pay my selling agents a percentage on every order they bring in, and I give my distributors a discount off the list price. Do I deduct under section 194H, at what rate, and from what figure does the obligation start?
