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Tax Savings for NRIs: The Lower Deduction Certificate

Tax Deducted at Source (TDS) can sometimes feel like a financial pinch, especially when it’s at a higher rate than your estimated tax liability. Enter the Lower Deduction Certificate (LDC). It’s a way to ensure you’re only paying what you owe and not a rupee more.

The Application can be made where income of any person attracts TDS at the higher rate but the person justifies non-deduction or lower deduction of income tax based on his estimated tax liability. Application for Nil or Lower TDS Certificate can be filed by any person i.e., Resident or Non-Resident (NRI).

Getting Started Online

The journey begins with an online application, submitted via Form 13 on the Traces Portal. Click here

Here’s Your Checklist Before Applying:

  • Pan is mandatory to apply for this Certificate
  • DSC registered with the traces OR E-verification (through Internet Banking) OR Mobile OTP
  • Copy of Passport
  • Estimated income computation for the FY relevant to the transaction
  • Details of income claimed to be exempt and not to be included in the total income for Form-13 application
  • Assessment Orders passed, if assessed for last 4 Assessment Years
  • Income Tax Return of previous 4 Financial Year

LDC in Action: Scenarios Where It’s Most Beneficial

  1. Sale of immovable property by NRI to Indian Buyer:

The Indian buyer disburses the sale consideration after deducting TDS depending upon the value of transaction. Maximum TDS rate is capped @ 23.92%. If the NRI justifies that his actual income tax liability is less than the TDS rate, LDC shall be issued by the Assessing Officer.

Additional documents required to obtain LDC in case of sale of Immovable property apart from the one specified above are:

      • Copy of Sale deed of the property
      • Copy of purchase deed of the property
      • TAN of the buyer of the property

2. Receiving Payments without a Physical Entity in India:

Foreign companies without a physical presence in India face a whopping 40% TDS on payments. But with Form 13, this rate can be tapered down.

 3. NRI Rental Earnings in India:

The rental income earned by NRI is liable for TDS @ 31.2%. This rate can be reduced by requesting for Lower Deduction Certificate from the Income Tax Department.


Ques: Within how much time period Certificate can be obtained from the Department?

Ans: The Certificate shall be issued by the AO within 1 month from the end of the month in which application is received.

Ques: What is the validity of the Certificate?

Ans: The Certificate shall be valid for such period as may be mentioned in that unless cancelled by the Assessing Officer before the expiry of that period.

Ques: Can details in Form 13 be altered?

Ans: Once submitted, Form 13 cannot be altered. However, the taxpayer has the option to withdraw the application until it is approved by the Assessing Officer.

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