Tax Advisor view for TDS on Sale of Property

In July 2018, Shayna sold a property in Mumbai. Shayna is 26 years old and works as a freelancer consultant for Graphics Design. She did not know about payment of TDS on sale of Property at the time of sale. Also, even the buyer was unaware about the income tax provisions of TDS on sale of Property.

Let’s understand about the tax liability and payment of TDS when selling the Property. To make things little easier to understand, I have created these slides which explains all the provisions in detail:

Other Thing that you should know:

What is Form 26QB?

Form 26QB is the for that has to be filled by the buyer or his CA. It is basically a a return cum challan which has to be filed within 30 days of the next month (of the sale of property). If the buyer fails to deduct then he will get a notice for non-filing of Form 26QB

What exactly is Form 16B? 

Form 16B is a TDS certificate for TDS deducted on a successful sale of property or home. As soon as the buyer makes the payoff of TDS on behalf of the seller, a TDS certification gets generated after a short time of making the payment to the government. The purchaser can then obtain this certificate often known as Form 16B and provide to the seller as a testament to TDS submission. 

What are the Modes of Payment?

The payment of TDS can be done any of the following ways: 

• On the web by means of the e-tax payment option.
• On the web by means of net banking account of the buyer.
• Physically going to any authorized bank branches 

Responsibilities of an individual Deducting TDS on Sale of Property or home 

There are specific fundamental duties explained below of person who is liable to deduct tax at source: 

• To get Tax Deduction Account Number also known as TAN and quote the same in all the documents pertaining to TDS.
• To deduct the tax at source at the appropriate rate.
• To pay off the tax deducted by him or her at the source to the credit of the Government by filing Form 26QB on or before the due date.
• To file the regular TDS returns.
• To download and issue the TDS certificate or Form 16B to the payee in respect of tax deducted by him by the due date stipulated by law in this respect. 
  
  

Is TAN Mandatory for a Person Accountable for Deducting TDS? 

Yes, everybody responsible for TDS is required to obtain TAN. Tax deduction and Collection Account Number is a ten-digit alpha-numeric unique identification number allotted to the deductor and must be quoted in all communication of the deductor thereby. 
For those who don’t have TAN, the payment of tds is to be filed with the help of Form 26QB and then issuing a certificate for tax deduction under Form 16B. Form 26QB is available in the e-payment section of Tax Information Network (TIN ) of the Income Tax Department .

Frequently Asked Questions

What are the consequences a deductor would face if he fails to deduct TDS or after deducting the same fails to deposit it to the Government’s account?

A deductor would face the following consequences if he fails to deduct TDS or after deducting the same fails to deposit it to the credit of Central Government’s account:

Levy of interest: As per section 201 of the Income-tax Act, if a deductor fails to deduct tax at source or after the deducting the same fails to deposit it to the Government’s account then he shall be deemed to be an assesse -in-default and liable to pay simple interest as follows:

at 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and

at 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

Levy of penalty: Penalty of an amount equal to tax not deducted or paid could be imposed under section 271C.

What if the payer does not deduct tax at source, will the payee face any adverse consequences by means of action taken by the Income-tax Department?

It is the duty and responsibility of the payer to deduct tax at source. If the payer fails to deduct tax at source, then the payee will not have to face any adverse consequences. However, in such a case, the payee will have to discharge his tax liability. Thus, failure of the payer to deduct tax at source will not relieve the payee from payment of tax on his income.

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