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CMA Intermediate · Direct and Indirect Taxation · Tax Deducted at Source and Tax Collected at Source

Under the Income-tax Act, 2025, a buyer is liable to pay a sum on which tax is required to be collected at source. Which statement about lower collection under section 395(3) is correct?

The buyer, licensee or lessee may apply to the Assessing Officer for collection at a lower rate, and once a certificate is issued the collector must collect at the certificate rate during its validity. The provision covers a lower rate, not nil.

  1. AThe buyer may apply to the Assessing Officer for collection of tax at a lower rate, and the collector must use the certificate rate during validityCorrect
  2. BThe buyer may apply for nil collection, and the collector must then collect nothing
  3. COnly the seller may apply for a lower rate of collection
  4. DThe buyer may apply, but the collector may ignore the certificate

Explanation

Section 395(3) allows the buyer, licensee or lessee to apply for collection at a lower rate; if the AO is satisfied on the buyer's total income, a certificate is issued and the collector collects at that rate until validity. The provision speaks of a lower rate, not nil, and the seller has no application right.

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