Section 206AA(1)(iii)

Section 206AA(1)(iii) — the law in short

What the courts have decided on section 206AA(1)(iii), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Shailesh Veljibhai Paladiya v. ITO, TDS Ward-2, Surat (ITAT Surat) — section 206AA cannot be invoked where section 194-IA itself is not attracted, and deducting one per cent by mistake is not an admission of liability ITATHelps taxpayerNo later treatment found
  I deducted one per cent on a land purchase where the sellers had no PAN, and the officer says I should have deducted twenty per cent under section 206AA. The land was agricultural. Can he charge me the difference because I deducted something?
  No. The Tribunal held that section 206AA merely prescribes a higher rate where tax is otherwise deductible and does not create an independent liability to deduct, so unless the transaction falls within section 194-IA the enhanced rate cannot be invoked at all. The land being agricultural, section 194-IA was not attracted, and the section 201(1) demand of Rs 44,95,590 and the section 201(1A) interest of Rs 42,25,854 were both deleted.
• 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 CBDT Circulars & InstructionsCuts both ways
  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.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.