A payee hands over a certificate, somebody notes "lower TDS" against the ledger, and the rate is applied for the rest of the year. That is how most of the defaults in this area are created, and nothing about the process looks careless while it is happening.
A certificate under section 197 is narrow in three separate directions at once. It runs between two dates. It covers a named payment from a named deductor. And it covers an amount.
The third one is the one that catches practices, because it is the only limit that can be exhausted quietly in the middle of a perfectly ordinary year.
What the certificate actually is
The payee applies to the Assessing Officer. The certificate is issued in the name of the person who deducts, not in the name of the payee in general, and that person then deducts at the rate it states, or not at all, for as long as it is valid.
Up to tax year 2025-26 this is section 197 of the Income-tax Act, 1961, applied for in Form No. 13 under rules 28 and 28AA.
From tax year 2026-27 it is section 395(1) of the Income-tax Act, 2025, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026. A lower rate of collection, rather than deduction, is section 395(3).
The wording about who it is issued to is the part worth reading twice. A certificate naming a different deductor is not your client certificate, however genuine it is.
Limit one: the dates
Rule 213(7) makes a certificate valid for the period of the tax year it states, unless it is cancelled.
This sounds obvious and produces two distinct errors.
The first is applying the certificate to a payment made before it starts. A certificate issued in August and valid from August does nothing for the April to July payments, and those were at the normal rate whether or not anyone deducted at it.
The second is carrying it into the next year. A certificate is for its stated period. A new year needs a new certificate, and a payee who has had one for three years running is a payee somebody will eventually forget to ask.
Pro tip
Record the valid-from and valid-to dates when the certificate is filed, not the year. A certificate that runs from August to March is normal, and a register that only holds the year will silently apply it to April.
Limit two: the payment and the deductor it names
Rule 213(8) limits a certificate to the specified payment from the specified deductor.
So a certificate for contract payments does nothing for rent paid to the same party. A certificate held by one group company does nothing for a payment made by another, even where the payee is the same and the group is the same.
In a practice this shows up most often with a party that supplies two things. Professional services and a works contract go to the same vendor ledger, and the certificate covers one of them.
The defensible habit is to record the kind of payment on the certificate when it is entered, and to match a payment to a certificate only when the kind agrees as well as the party.
Limit three: the amount, which is the one that gets missed
Rule 213(8) also limits the certificate to the extent of the amount it states.
That means a certificate is consumed. Payments in the year eat into it, in date order, and once the stated amount has been paid the certificate is finished. Everything after it is at the normal rate, including the second half of the very payment that crossed the line.
So a payment can be split: part of it under the certificate rate, the rest at the normal rate. This is not an edge case. It is what happens on the payment that crosses the threshold, which is a payment that occurs in every exhausted certificate exactly once.
Working that out by hand at the year end, after the deductions have already been made, is how a short deduction default is discovered. Working it out as each payment is recorded is simply bookkeeping.
- Take the year payments to that payee, for that kind of payment, in date order
- Apply the certificate rate until the stated amount is used up
- Apply the normal rate to the rest, including the remainder of the payment that crossed it
- Record which certificate covered which payment, because the statement asks
It has to reach the return as well
A certificate is not only a rate. It is a disclosure.
The deductee record in the quarterly statement carries a reason flag where a lower deduction was made under a certificate, and the certificate number goes on the line. A line deducted at a lower rate with no flag and no number is a line the processing will treat as a short deduction, and the intimation that follows is correct on its own terms.
That is the strongest argument for keeping the certificates in a register rather than in an email folder: the register is what fills the flag and the number, and a number typed from memory into a quarterly statement is a number that will eventually be wrong.
Greenote keeps the register per client on the practice own PC, never synced, because a payee PAN with a rate against it is a client tax record. The certificate number, the PAN, the kind of payment, the rate, the amount and the dates are all typed from the certificate itself. Nothing about a certificate is guessed, and the coverage of each payment is worked out in one place that both the exposure check and the quarterly statement read.
Important
Never carry a certificate number forward from last year template. Certificate numbers are ten or fifteen characters and a stale one passes a format check while being the wrong certificate entirely.
Conclusion
A certificate is a narrow instrument: a rate, for one payment type, from one deductor, between two dates, up to an amount. Treating it as a property of the payee is what produces the default.
The whole protection is a register with all six of those facts in it, filled when the certificate arrives, and a rule that no payment gets the lower rate unless all six agree.
The form number changes in 2026-27 and the limits do not. Here is the full renumbering, and here is the related exposure check. See what the TDS workspace covers.
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