Rule 213 — Application for grant of certificates for deduction or collection of income-tax at any lower rates, or no deduction of income-tax. Made under s.395, s.393, s.263 of the Income-tax Act, 2025.
Rule 213 gives effect to Section 395, Section 393 and Section 263 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
The rule governs applications for a certificate authorising deduction or collection of tax at a lower rate or no deduction.
Sub-rule (1) requires the application to be made in Form No. 128, for a certificate for deduction of income-tax at any lower rate or no deduction under section 395(1), or for collection of income-tax at any lower rate under section 395(3). Sub-rule (2) provides that sub-rule (1) may not be applicable to a person eligible for a certificate of no deduction of tax in respect of income or sums specified under rule 209.
Sub-rule (3) lists what the Assessing Officer takes into account before issuing the certificate: tax payable on the estimated income for the tax year under consideration; tax paid or payable on the returned income, assessed income or estimated income of the last four tax years; existing liability under the Act and under the Income-tax Act, 1961 as it existed prior to its repeal; and advance tax payments and taxes deducted or collected at source standing to the taxpayer's credit as on the date of application for the tax year applied for.
Sub-rule (4) adds two further conditions for a specified entity referred to in section 263(9)(c) or a registered non-profit organisation: the entity must be approved for exemption from income-tax both on the date of application and on the date of grant of the certificate for that tax year, and it must have furnished the returns of income for the last four tax years for which those returns became due on or before the date of application.
Sub-rule (5) adds conditions for a certificate in respect of dividend income referred to in section 393(1) [Table: Sl. No. 7]: the shares must be shares in public companies, and either they stand in the applicant's name and are beneficially owned by him with the dividends not includible in another person's total income under sections 96 to 99, or they stand in his name and are held on behalf of a registered non-profit organisation with the dividends exempt under Chapter XIX-B. Sub-rule (6) provides that such a certificate ceases to operate from the date of notice to the company for transfer of the shares mentioned in it to another person, to the extent of income corresponding to the shares transferred.
Sub-rule (7) makes the certificate valid for such period of the tax year as may be specified in it, unless cancelled by the Assessing Officer before the specified period expires. Sub-rule (8) requires the certificate to be issued in the name of the person responsible for deducting or collecting the tax, under advice to the applicant, and makes it valid only for a specified payment from the specified deductor, and a specified receipt from the specified collector, to the extent of the amount specified in the certificate. Sub-rule (9) deals with a large number of payers: where the number of persons responsible for deducting the tax is likely to exceed one hundred and their details are not available with the applicant at the time of making the application, the certificate may be issued in the applicant's own name, authorising him to receive specified payments at the appropriate rate of deduction and to generate the appropriate certificate and provide it to the person responsible for deducting tax, such certificate being generated from the portal of the Income-tax Department.
Section 395 allows tax to be deducted or collected at a lower rate, or not at all, where the recipient's final liability will not justify the standard deduction. Left unstructured, that would be an invitation to argument about estimated income. The rule fixes one application form, gives the Assessing Officer a defined set of things to weigh — this year's estimate, four years of history, existing liability and taxes already to the applicant's credit — and then controls the certificate's reach: it is issued to the payer, for a named payment, up to a named amount, for part of a tax year.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Period of past tax history considered | Last four tax years | Tax paid or payable on the returned income, assessed income or estimated income, as the case may be | Sub-rule (3)(b) |
| Returns required from a specified entity or registered non-profit organisation | Last four tax years | Those for which the returns became due on or before the date on which the application is made | Sub-rule (4)(b) |
| Validity of the certificate | Such period of the tax year as may be specified in the certificate | Unless cancelled by the Assessing Officer before the expiry of the specified period | Sub-rule (7) |
| Number of deductors above which a certificate may issue in the applicant's own name | Likely to exceed one hundred | And their details are not available with the applicant at the time of making the application | Sub-rule (9) |
A certificate is not a general licence. Under sub-rule (8) it is issued in the name of the person responsible for deducting or collecting the tax, only under advice to the applicant, and it works only for a specified payment from that specified deductor or a specified receipt from that specified collector, and only up to the amount specified — so exhausting the amount or receiving from a different payer takes the payment outside the certificate. Its life is a period within a tax year fixed in the certificate itself, and sub-rule (7) lets the Assessing Officer cancel it before that period ends. Sub-rule (9) is the answer for an applicant with many payers, but it changes the mechanics rather than the substance: the certificate is issued in the applicant's name and he generates the certificate for each deductor from the Department's portal. For a specified entity or registered non-profit organisation the approval must hold at two moments — the date of application and the date of grant — so an approval that lapses in between defeats the application. The dividend conditions in sub-rule (5) are additional to sub-rule (3), not a substitute for it, and sub-rule (6) makes the certificate lapse on those shares from the date of notice to the company for their transfer.
A company expects a loss for the year and applies in Form No. 128 for deduction at nil rate on contract receipts from a customer. The Assessing Officer weighs the estimated income for the year, the tax paid or payable for the last four tax years, existing liability and the advance tax and credits standing as on the application date, and issues a certificate in the customer's name, under advice to the company, for payments up to Rs 5 crore for the period ending 31 March. A payment from a second customer is outside the certificate, and once Rs 5 crore has been paid the customer must deduct at the ordinary rate on the excess.
You meet it before a large receipt goes out — in the Form No. 128 application, in the certificate the payer receives and holds on his file, and in the payer's deduction workings once the specified amount runs out.
The certificate specified under this rule shall be valid for such period of the tax 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.
The certificate shall be issued in the name of the person responsible for deducting or collecting the tax, under advice to the applicant
the specified entity is approved for the purpose of exemption from income-tax as on the date of application and also as on date of grant of certificate for that tax year
