What Is Form 13?
Form 13 is an income tax application form that allows NRIs to seek a certificate for lower or nil deduction of TDS. The certificate is issued after assessment by the Income Tax Department’s Assessing Officer (TDS). The entire process is now online, available through the TRACES portal.
Once issued, the certificate specifies the applicable TDS rate for a particular transaction or income stream. It remains valid for:
- A specific financial year; or
- A particular deductor or transaction (depending on the approval terms).
This ensures that while taxes are still deducted at source, the deduction reflects the actual liability rather than the default higher rate.
Why Form 13 Is Important for NRIs
TDS for NRIs is usually based on the total amount of the transaction, without taking into account any exemptions, indexed costs, or deductions. As an example:
If an NRI sells property in India for ₹1.5 crore and buys it for ₹1.1 crore, the taxable long-term capital gain (LTCG) is ₹40 lakh. The actual tax bill (at a rate of 20%) is about ₹8.3 lakh. The buyer must take out about ₹31 lakh (20.8% of ₹1.5 crore) as TDS, though, unless they get Form 13.
The buyer can only deduct the actual tax (₹8.3 lakh) by showing a reduced TDS certificate. This frees up ₹23 lakh that would have been stuck for months as a refund claim.
Eligible Incomes for Lower/NIL TDS Certificate
NRIs can apply under Section 197 if they earn income under the following categories:
- Sale of immovable property in India (Section 195)
- Salary income (Section 192)
- Interest on securities (Section 193)
- Dividends (Section 194)
- Rent (Section 194-I)
- Professional or technical fees (Section 194J)
- Insurance commission (Section 194D)
- Brokerage or commission income (Section 194H)
- Compensation on property acquisition (Section 194LA)
- Income from investment funds or securitisation trusts (Section 194LBB/194LBC)
This list reflects the most common income heads where NRIs can request relief from excessive TDS.
Conclusion
For NRIs, managing taxes efficiently means balancing compliance with liquidity. The Form 13 mechanism under Section 197 helps achieve exactly that by allowing tax deduction at actual liability levels instead of inflated default rates.
Whether selling property, earning rent, or receiving dividends, securing a lower or nil TDS certificate can save lakhs in immediate cash outflow and months of refund waiting time. With the entire process digitized and accessible globally, NRIs can now handle Indian tax deductions smarter and more effectively.
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