Simplify Your Tax Compliance with a Lower Deduction Certificate
A Lower Deduction Certificate (LDC) is your key to reducing tax burdens on income streams subject to Tax Deduction at Source (TDS). Our expert services help you secure this certificate seamlessly, ensuring compliance and maximizing cash flow.
A Lower Deduction Certificate is issued under Section 197 of the Income Tax Act, 1961, allowing taxpayers to receive income at a reduced or nil TDS rate. It is applicable for individuals and businesses whose actual tax liability is lower than the TDS rate prescribed under the Act.
Who Needs a Lower Deduction Certificate?
- Businesses and Individuals with income streams like:
- Contracts and subcontracts
- Professional and technical fees
- Rent, interest, or commission income
- Dividend income
- Entities Facing High TDS Deductions:
- Tax liability is significantly lower than the applicable TDS rate.
- Tax liability is significantly lower than the applicable TDS rate.
- Non-Residents:
- Those eligible for reduced tax rates under Double Taxation Avoidance Agreements (DTAA).
Practical Scenarios Requiring a Lower Deduction Certificate
Real Estate Developers
A developer paying substantial interest on loans from individuals or companies can apply for an LDC to reduce TDS on interest payouts, ensuring liquidity for ongoing projects.
Freelancers and Consultants
A consultant receiving professional fees from multiple clients may apply for an LDC if their total income is below the taxable limit or qualifies for deductions, to avoid over-taxation.
Rental Income
A property owner receiving rental income from corporate tenants at a higher TDS rate (e.g., 10%) can apply for an LDC if their total tax liability is lower due to deductions like interest on home loans.
facturers
An exporter receiving payments from foreign buyers through Indian agents, where TDS is applied, can benefit from an LDC to claim lower deductions and enhance cash flow.
Non-Residents
A non-resident receiving payments for technical services in India may apply for an LDC to benefit from DTAA rates instead of higher default TDS rates.
Dividend Income
shareholders receiving significant dividend income can apply for an LDC to avoid excessive TDS if their effective tax rate is lower due to exemptions or deductions.
High-Tax Deduction on Contractual Payments
Contractors receiving payments from multiple entities, where TDS is applied at a standard rate, may use an LDC to ensure their actual tax liability aligns with their financial position.
When Is a Lower Deduction Certificate Required?
At the Start of the Financial Year
Ideal to apply early to minimize higher TDS deductions.
For Regular Income Streams
Needed when income flows regularly and incurs substantial TDS deductions.
Before Major Payments
Secure the certificate before receiving significant payments.
Why Obtain a Lower Deduction Certificate?
Avoid Excess TDS Deductions
Prevent cash flow issues caused by over-deduction.
Optimize Cash Flow
Retain more working capital by reducing upfront tax payments.
Compliance with Tax Laws
Ensure timely and accurate compliance with TDS provisions.
How to Obtain a Lower Deduction Certificate?
Application Preparation
Submit Form 13 to the Income Tax Department via the TRACES portal.
Documentation
Gather and upload required documents (see list below).
Verification by Tax Officer
The Assessing Officer examines the application and supporting documents.
Issuance of Certificate:
Once approved, the certificate is issued and shared with the deductor.
- PAN of the Applicant
- Financial Statements(last three years)
- Tax Audit Reports(if applicable)
- Details of Income and TDS for the Current Year
- Projected Financials for the Current Year
- Nature of Transactions: Contracts, invoices, agreements, etc.
- Tax Payment Proofs: Advance tax or self-assessment tax receipts.
- Supporting DTAA Claims(if applicable): TRC, residency certificate of the payer, etc.
- Application Submission: 1-3 business days (subject to document availability).
- Assessment by Tax Officer: Typically, 15-30 days.
- Issuance of Certificate: After successful verification by the Income Tax Department.
Why Choose Us for LDC Services?
Expert Guidance
Experienced Chartered Accountants simplify the process.
Accurate Filing
Ensure error-free applications to avoid delays.
End-to-End Support
From document preparation to certificate issuance.
Tailored Solutions
Customized advice based on your income streams and tax liability.
Quick Turnaround
Get your certificate in the shortest possible time.
Optimize Your Tax Liability with Ease
Stop losing liquidity to unnecessary TDS deductions. Partner with us to secure your Lower Deduction Certificate and keep your finances in check.