CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 197 — Certificate for Deduction at Lower Rate or No Deduction
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. The relief valve against excess deduction; quasi-judicial.
Finance Act, 2026: No amendment.
Mechanism: On the recipient's application (Form 13), the Assessing Officer may certify a lower or nil rate of deduction under the enumerated sections, computed under Rule 28AA; the payer then deducts per the certificate.
Litigation profile: Moderate. The settled themes are the quasi-judicial, reasoned character of the order and its reviewability by revision and writ.
A. SECTION COMMENTARY
Section 197 is the relief valve of the deduction machinery. On an application by the recipient of income, the Assessing Officer, if satisfied that the recipient's total income justifies deduction at a lower rate or no deduction at all, may issue a certificate to that effect; the person paying the income must then deduct at the rate specified in the certificate (or not at all) until it is cancelled. It applies to most of the deduction sections (the enumerated list in sub-section (1)) and is operationalised through Rules 28, 28AA and 28AB and Form 13.
A quasi-judicial, reasoned decision
Although couched in the language of the Assessing Officer's 'satisfaction', the power under section 197 is not unfettered. The determination is to be made in accordance with the existing-and-estimated-liability methodology in Rule 28AA, and the order disposing of the application must be a reasoned one; an arbitrary or unreasoned rejection is liable to be set aside. The certificate is prospective and may be made subject to conditions; it is specific to the payee and, generally, to the payer(s) named.
Remedies — revision and writ
An order under section 197 (including a rejection or a certificate at a higher-than-sought rate) is amenable to revision under section 264 and, given the time-sensitivity of withholding, the High Courts have entertained writ petitions directly where the statutory remedy is not efficacious. The courts have repeatedly intervened where the Department dealt with section 197 applications in a cavalier or non-speaking manner, emphasising that the provision exists to prevent excess deduction and the consequent blocking of the assessee's funds.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
197. (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) ***
C. AUTHORITIES
The authorities establish that the section 197 power is quasi-judicial and reviewable, and that a reasoned order is required. All citations are web-verified.
Cluster 1 — Reasoned order, revision and judicial review
Issue: The nature of an order under section 197 and the remedies against it.
Held: An order under section 197 is a quasi-judicial order that must be passed on relevant considerations and is amenable to revision under section 264; the Assessing Officer cannot deal with a section 197 application in a cavalier manner.
Significance: Establishes the reviewability of section 197 orders and the requirement of a proper, reasoned determination.
Tata Teleservices and the writ remedy (Bombay High Court)
Principle: Given the urgency of withholding decisions, the High Courts have entertained writ petitions against section 197 rejections (including those passed with the concurrence of a superior officer) where the section 264 remedy is not efficacious, and have set aside non-speaking or arbitrary orders.
Use: Confirms the practical availability of immediate judicial review of a section 197 refusal.
Cluster 2 — The Rule 28AA methodology (cognate)
Rule 28AA — existing and estimated liability
Principle: The lower/nil rate is to be determined on the basis of the recipient's existing and estimated tax liability worked out under Rule 28AA; the certificate must reflect that computation rather than an ad hoc figure, and the absence of three years' financial statements does not, by itself, defeat the mechanism.
Use: Supplies the computational discipline behind a section 197 certificate.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 197 — Certificate for Deduction at Lower Rate or No Deduction
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. The relief valve against excess deduction; quasi-judicial.
Finance Act, 2026: No amendment.
Mechanism: On the recipient's application (Form 13), the Assessing Officer may certify a lower or nil rate of deduction under the enumerated sections, computed under Rule 28AA; the payer then deducts per the certificate.
Litigation profile: Moderate. The settled themes are the quasi-judicial, reasoned character of the order and its reviewability by revision and writ.
A. SECTION COMMENTARY
Section 197 is the relief valve of the deduction machinery. On an application by the recipient of income, the Assessing Officer, if satisfied that the recipient's total income justifies deduction at a lower rate or no deduction at all, may issue a certificate to that effect; the person paying the income must then deduct at the rate specified in the certificate (or not at all) until it is cancelled. It applies to most of the deduction sections (the enumerated list in sub-section (1)) and is operationalised through Rules 28, 28AA and 28AB and Form 13.
A quasi-judicial, reasoned decision
Although couched in the language of the Assessing Officer's 'satisfaction', the power under section 197 is not unfettered. The determination is to be made in accordance with the existing-and-estimated-liability methodology in Rule 28AA, and the order disposing of the application must be a reasoned one; an arbitrary or unreasoned rejection is liable to be set aside. The certificate is prospective and may be made subject to conditions; it is specific to the payee and, generally, to the payer(s) named.
Remedies — revision and writ
An order under section 197 (including a rejection or a certificate at a higher-than-sought rate) is amenable to revision under section 264 and, given the time-sensitivity of withholding, the High Courts have entertained writ petitions directly where the statutory remedy is not efficacious. The courts have repeatedly intervened where the Department dealt with section 197 applications in a cavalier or non-speaking manner, emphasising that the provision exists to prevent excess deduction and the consequent blocking of the assessee's funds.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
197. (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) ***
C. AUTHORITIES
The authorities establish that the section 197 power is quasi-judicial and reviewable, and that a reasoned order is required. All citations are web-verified.
Cluster 1 — Reasoned order, revision and judicial review
Larsen & Toubro Ltd. v. ACIT (2010) 326 ITR 514 (Bom)
Issue: The nature of an order under section 197 and the remedies against it.
Held: An order under section 197 is a quasi-judicial order that must be passed on relevant considerations and is amenable to revision under section 264; the Assessing Officer cannot deal with a section 197 application in a cavalier manner.
Significance: Establishes the reviewability of section 197 orders and the requirement of a proper, reasoned determination.
Tata Teleservices and the writ remedy (Bombay High Court)
Principle: Given the urgency of withholding decisions, the High Courts have entertained writ petitions against section 197 rejections (including those passed with the concurrence of a superior officer) where the section 264 remedy is not efficacious, and have set aside non-speaking or arbitrary orders.
Use: Confirms the practical availability of immediate judicial review of a section 197 refusal.
Cluster 2 — The Rule 28AA methodology (cognate)
Rule 28AA — existing and estimated liability
Principle: The lower/nil rate is to be determined on the basis of the recipient's existing and estimated tax liability worked out under Rule 28AA; the certificate must reflect that computation rather than an ad hoc figure, and the absence of three years' financial statements does not, by itself, defeat the mechanism.
Use: Supplies the computational discipline behind a section 197 certificate.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.