Application for grant of certificates for deduction or collection of income-tax at any lower rates, or no deduction of income-tax

Corresponding 1962 rules: rules 28, 28AA, 28AB, 37G and 37H (Form No. 128 replaces Form No. 13).

The application (sub-rules 1 and 2). An application is made in Form No. 128 for a certificate for (a) deduction at a lower rate, or no deduction, under section 395(1), or (b) collection at a lower rate under section 395(3). Sub-rule (1) may not apply to a person eligible for a no-deduction certificate for income or sums under rule 209.

What the Assessing Officer considers (sub-rule 3).

• (a) tax payable on the estimated income of the tax year under consideration;
• (b) tax paid or payable on the returned, assessed or estimated income of the last four tax years;
• (c) existing liability under the Act and under the Income-tax Act, 1961 as it existed before repeal; and
• (d) advance tax, and tax deducted or collected at source, to the taxpayer's credit on the date of application for the tax year applied for.

Specified entities and registered non-profit organisations (sub-rule 4). For a specified entity referred to in section 263(9)(c), or a registered non-profit organisation, the Assessing Officer also considers whether the entity is approved for exemption both on the date of application and on the date of grant for that tax year, and whether returns have been furnished for the last four tax years for which they fell due on or before the date of application.

Dividends (sub-rules 5 and 6). For dividend income referred to in section 393(1) [Table: Sl. No. 7], the shares must be shares in public companies, and must either stand in the applicant's name and be beneficially owned by the applicant, with the dividends not includible in any other person's total income under sections 96 to 99, or stand in the applicant's name and be held on behalf of a registered non-profit organisation whose dividends are exempt as the rule states. Such a certificate ceases to operate, to the extent of the shares transferred, from the date of notice to the company of their transfer to another person.

Validity and scope (sub-rules 7 and 8). The certificate is valid for the period of the tax year specified in it, unless the Assessing Officer cancels it earlier. It is issued in the name of the person responsible for deducting or collecting, under advice to the applicant, and is valid only for a specified payment from the specified deductor, or a specified receipt from the specified collector, up to the amount specified.

Many deductors (sub-rule 9). Where the deductors are likely to exceed one hundred and their details are not available when applying, a lower-rate deduction certificate may be issued in the applicant's own name, authorising the applicant to receive specified payments at the appropriate rate and to generate the appropriate certificate from the Income-tax Department's portal and give it to the deductor.