Circular No. 774

1174. Whether certificate issued under section 197(1) will be applicable only in respect of credit or payments, as the case may be, subject to tax deduction at source, made on or after date of such certificate

What this is

Circular No. 774 was issued by the Central Board of Direct Taxes on 17 March 1999. Its subject is 1174. Whether certificate issued under section 197(1) will be applicable only in respect of credit or payments, as the case may be, subject to tax deduction at source, made on or after date of such certificate.

What it does

Stops the practice of backdated low-deduction certificates. A certificate under section 197(1), which an Assessing Officer issues where the recipient satisfies him that tax should be deducted at a lower rate or not at all in respect of deductions under sections 192, 193, 194, 194A, 194D, 194-I, 194K and 195, applies only to credits or payments made on or after the date of the certificate. No certificate is to be issued after the amount subject to deduction has been credited or paid, whichever is earlier, and an application made after that point should not be acted upon. An assessee in genuine hardship may approach the Board for condonation of delay under section 119(2)(b).

Why it was issued

It had come to the Board's notice that in certain charges certificates under section 197(1) were being issued even after the amounts subject to deduction had been credited or paid, which is not in accordance with law.

Who it reaches

Payees applying for a lower or nil deduction certificate
Deductors relying on such a certificate
Assessing Officers issuing certificates under section 197(1)
Assessees who applied late and face full deduction

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.119	s.239
s.192	s.392, s.402
s.197	s.395, s.400

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

1174. Whether certificate issued under section 197(1) will be applicable only in respect of credit or payments, as the case may be, subject to tax deduction at source, made on or after date of such certificate
1. Section 197(1) of the Act envisages that, where tax is deductible at source in terms of sections 192, 193, 194, 194A, 194D, 194-I, 194K and 195 of the Income-tax Act, and the recipient justifies the deduction of tax at any lower rate or no deduction of tax to the satisfaction of the Assessing Officer, the Assessing Officer shall issue an appropriate certificate. It has come to the notice of the Board that in certain charges a practice has developed to issue certificates under section 197(1) of the Income-tax Act even after the credit or payment of amounts subject to tax deduction at source. This is not in accordance with the provisions of law.
2. It is, therefore, clarified that the certificate issued under section 197(1) of the Income-tax Act will be applicable only in respect of credit or payments, as the case may be, subject to tax deduction at source, made on or after the date of such certificate. Therefore, no certificate under section 197(1) of the Income-tax Act should be issued after the amounts subject to tax deduction at source stand credited or paid, whichever is earlier.
3. In other words, henceforth, application requesting for certificate under section 197(1) should not be acted upon if submitted after credit/payment of the amount subject to tax deduction at source. However, assessees having genuine hardship in submitting such applications on time may refer to the Board for condonation of delay in terms of section 119(2)(b) of the Income-tax Act.
Circular : No. 774, dated 17-3-1999.

What to watch

The timing is decided by credit or payment, whichever is earlier, so a credit in the payer's books closes the door even before money moves.
A certificate obtained late gives the deductor no protection for deductions already due.
The only route left for a late applicant is condonation by the Board under section 119(2)(b), which is a separate application on genuine hardship.

Where you meet it

In a section 201 proceeding where the deductor produces a certificate dated after the payment, and in an application for a certificate filed towards the end of a year.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 6/2026 — Condonation of delay in filing Form No. 10AB electronically for approval under clause(ii) of the first proviso to sectio 2 July 2026
Circular No. 2/2026 — Order under section 119 of the Income-tax Act, 1961 for extension of timeline for issuance of tax deducted at source (TD 25 March 2026
Circular No.15/2025 — Extension of timelines for filing of various reports of audit and income tax returns ITRS for the assessment year 2025 2 29 October 2025
Circular No. 10/2025 — Relaxation of time limit for processing of returns of income filed electronically which were incorrectly invalidated by 28 July 2025
Circular No. 7/2025 — Relaxation of time limit for processing of valid returns of income filed electronically pursuant to order u/s 119(2)(b) 25 June 2025
Circular No. 6/2025 — Extension of due date for furnishing return of income for the Assessment Year 2025-26 27 May 2025

← Circular No. 775 · Circular No. 773 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.