What is a Lower TDS Certificate (Form 13) for NRIs?
A Lower (or Nil) TDS Certificate is issued by the Income Tax Department under Section 197, on an application in Form 13. It tells whoever is paying an NRI — a property buyer, a tenant, or a bank — to deduct tax at the NRI's actual computed liability instead of the higher default rate under Section 195. It's most commonly used for property sales, rental income, and NRO interest.
A concrete example first
Consider an NRI based in Toronto who inherited a flat in Pune from a parent and is now selling it for ₹1.2 crore. The buyer, worried about non-compliance, plans to deduct tax on the entire sale value at the rate applicable to non-residents — even though the NRI's actual taxable capital gain, after accounting for the property's cost of acquisition, is a fraction of that. Without intervention, a large chunk of the sale proceeds gets locked up as tax deducted at source, recoverable only many months later when the NRI files an Indian tax return. A lower TDS certificate exists precisely to prevent this.
Section 197 and Form 13, in plain terms
Section 197 of the Income Tax Act lets a taxpayer — resident or non-resident — apply to their jurisdictional Assessing Officer for a certificate authorising a lower rate of tax deduction, or none at all, on specified income. The application is made in Form 13, along with supporting computations and documents. Once issued, the certificate names the payer(s) it applies to and the rate they should deduct at, for a specified period, usually the remainder of a financial year.
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Check my eligibility →Who typically applies
Any NRI expecting income in India that would otherwise attract TDS at a flat, higher-than-necessary rate can apply — most commonly someone selling property in India, an NRI landlord receiving rent, or someone earning interest on an NRO account. The common thread is that the default withholding rate under Section 195 is set without reference to the recipient's actual tax position, so anyone whose real liability is meaningfully lower stands to benefit.
What actually changes once you have one
Once issued, you share the certificate with whoever is due to pay you — the property buyer, tenant, or bank — and they deduct tax at the rate (or nil rate) specified rather than the default rate. The certificate doesn't eliminate your tax liability; it aligns what's withheld with what you actually owe, so you aren't waiting on a refund for money that was never really due to the government in the first place. See our step-by-step guide to applying for Form 13 for the mechanics.
How this is different from Form 15CA/15CB
It's easy to conflate this with Form 15CA/15CB, since both involve NRIs and tax forms. They solve different problems, though — a lower TDS certificate reduces what's deducted when you're paid in India, while Form 15CA/15CB comes in later, when you want to move that money out of India to your overseas account. Our detailed comparison walks through both in the context of a single property sale.
Does a lower TDS certificate reduce my actual tax liability?
No. It only changes what gets deducted at source, aligning it with your real tax liability instead of a flat default rate. You still owe the same tax overall — the certificate simply prevents excess money from being locked up with the tax department until you file a return and claim it back.
This article is for general information only. For your specific situation, consult a practicing CA.
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