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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 payee whose total income justifies deduction of tax at a lower rate applies for relief. Once the Assessing Officer issues a certificate on that application, what must the person responsible for paying the sum do until the certificate's validity ends?

Once a lower or nil deduction certificate is issued, the payer must deduct tax at the rate stated in the certificate, or make no deduction if the certificate says so, for as long as it remains valid. The normal rate no longer applies during that period.

  1. ADeduct tax at the rate specified in the certificate, or deduct no tax if the certificate so providesCorrect
  2. BDeduct tax at the normal prescribed rate and leave the payee to claim a refund later
  3. CDeduct tax at the normal rate but deposit only the lower amount with the Government
  4. DSeek fresh approval from the Assessing Officer before every payment

Explanation

The Act says that when a certificate is issued, the payer shall deduct tax at the rate specified in it, or deduct no tax, as the case may be, till its validity. Deducting at the normal rate (option B) ignores the certificate. The payer does not need fresh approval for each payment.

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