Follow norms for TDS exemptions, Revenue department tells staff

The revenue department plans to check indiscriminate grants of exemptions from tax deducted at source by field formations.

The department will soon issue instructions to the formations that officers must strictly abide by income tax rules before issuing such exemptions.

Department officials said field formations had the power to issue a certificate for exemption from payment of TDS or lower payment of TDS under Section 197 of the Income Tax Act.

Since TDS accounts for almost 35 per cent of the government's direct tax revenues, the revenue department is keen to ensure that all organisations, companies and institutions, which are required to pay TDS, do so.

"Sometimes a company approaches the field formation pointing out that its TDS payment is more than its overall tax liability. In such cases, the field formation has the power to reduce the TDS liability. Similarly, if a company is exempt from the purview of the tax, then also the field formation issues a certificate to exempt the entity from TDS," an official said.

Officials pointed out that income tax rules clearly stated that the field level officer must examine the tax profile of the company, seeking the exemption or reduction in TDS, for the last three years.

The field formation is also expected to examine the income disclosed by the company and its effective tax rate before granting an exemption.