TDS on Purchase of Property : FAQ’s

By | April 21, 2016

FAQ on TDS on Purchase of Property​

 

TDS on Purchase of Property

If I buy any land/building then is there any requirement to deduct tax from the sale proceeds to be paid by me to the seller?

Yes, Finance Act, 2013 has introduced section 194-IA which provides for deduction of tax at source in case of payment of sale consideration of immovable property (other than rural agricultural land) to a resident. S​ection 194-IA is not applicable if the seller is a non-resident. Tax is to be deducted @ 1%. No tax is to be deducted if the consideration is below Rs. 50,00,000. If the sale consideration exceeds Rs. 50,00,000, then tax is to be deducted on the entire amount and not only on the amount exceeding Rs. 50,00,000.
If the seller is a non-resident then tax is be deducted under section 195 and not under section 194-IA. Thus, in case of purchase of property from non-resident TDS provisions of section 195​ will apply and not of section 194-IA

What are the legal Provisions in Section 194 IA of Income Tax act regarding TDS on Purchase of Property ?

See rules 30, 31, 31A, 31AB and 37BA and Form Nos. 16B, 26B, 26QB, 26AS and 27A.

Section 194IA (Inserted by the Finance Act, 2013, w.e.f. 1-6-2013. ) for Payment on transfer of certain immovable property other than agricultural land

194-IA. (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Explanation.—For the purposes of this section,—

(a) “agricultural land” means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;
(b) “immovable property” means any land (other than agricultural land) or any building or part of a building.]

Time to pay TDS on Purchase of Property ?

Any sum deducted under section 194-IA shall be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made .

How to Pay TDS on Purchase of Property ?

TDS shall be paid by challan-cum-statement in Form No. 26QB.”. the amount of tax so deducted shall be deposited to the credit of the Central Government by remitting it electronically within the time specified in sub-rule (2A) into the Reserve Bank of India or the State Bank of India or any authorised bank.”;

Is there any certificate to be issued to the seller of Property after payment of  TDS on Purchase of Property to the government by the buyer of property ?

Yes certificate is to be furnished by the buyers to the seller regarding deduction of tax at source in Form No. 16B.

What is the Time limit for issue of Certificate after payment of  TDS on Purchase of Property to the government by the buyer of property ?

The certificate is to be issued within fifteen days from the due date for furnishing the challan-cum-statement in Form No. 26QB after generating and downloading the same from the web portal (www.tdscpc.gov.in)

Can the buyer of Property makes the correction in Form 26QB if he finds some mistakes after payment of  TDS on Purchase of Property ?

The functionality for correction of Form 26QB has been made available online from 29th of Feb. 2016 to the deductors/buyers. Hence, the buyer, whose PAN exists in Form 26QB, can log in to www.tdscpc.gov.in and make the correction request for the following fields.

S. No. Field which can be changed With Digital Signature Without Digital Signature
1. Buyer’s PAN (When buyer’s PAN

AAAPA1111A is to be changed to PANBBBPB1111B)

Once request is raised by Buyer with digital signature(AAAPA1111A), the same will be pushed to the Seller and the new Buyer(BBBPB1111B). As soon as both of them approve the PAN will be updated. Once request is raised by Buyer without digital signature (AAAPA1111A) the same will be pushed to Seller and the new Buyer (BBBPB1111B) for approval. As soon as both of them approve the correction, by logging into TRACES, the ticket will be sent to TDS AO for physical verification of the facts and the genuineness of the buyer. TDS AO, if satisfied, can then approve the same from his inbox.

Please note whenever PAN of buyer is updated, the same may impact Major Head and category of PAN. This will be taken care of by the system itself before the request is raised.

2. Seller’s PAN (When Seller’s PAN is to be updated fromCCCPC1111C toDDDPD1111D) Once request is raised by Buyer with digital signature the same will be pushed to the existing Seller(CCCPC1111C) for approval. As soon as he/she approves the same, the PAN will be updated. Once request is raised by Buyer without digital signature, the same will be pushed to the existing Seller(CCCPC1111C) for approval. As soon as he/she approves the same, the request will be sent to TDS AO for physical verification of the facts and the genuineness of the buyer and the seller. TDS AO, if satisfied, can then approve the same from his inbox.

Please note whenever PAN of seller is updated, the same may impact category of PAN. This will be taken care of by the system itself before the request is raised.

3. Buyer’s Address Auto Approval Auto Approval
4. Seller’s Address Auto Approval Auto Approval
5. Property Details (Including Property Value) Auto Approval Auto Approval
6. Amount Paid/Credited -Amount Payable to the Transferor/Seller Auto Approval Once request is raised by Buyer without digital signature, the same will be sent to TDS AO for verification of the amount and the genuineness of the buyer. TDS AO, if satisfied, can then approve the same from his inbox.
7. Date of Payment to the Seller Auto Approval Once request is raised by Buyer without digital signature, the same will be sent to TDS AO for verification of the date and the genuineness of the buyer. TDS AO, if satisfied, can then approve the same from his inbox.

Please note that Financial year should always be in confirmation with the Date of Payment. The same will be taken care of by system itself before the request is raised.

8. Date of Tax Deduction Auto Approval Once request is raised by Buyer without digital signature, the same will be sent to TDS AO for verification of the date and the genuineness of the buyer. TDS AO, if satisfied, can then approve the same from his inbox.

In all the cases where approval by AO is required, deductor will be prompted to approach the TDS assessing officer with hard copy of the correction request (sample attached). Also, it is to be noted that when the request is raised without using digital signature, the system cannot establish the identity of the person involved. Therefore, in such a case it is forwarded to the TDS AOs (along with the documents uploaded by the deductor at the time of raising the request) for verification and approval/rejection. Hence, TDS AOs should pay due diligence in verification of the facts of the case and the genuineness of the persons involved before approving the ticket, especially when change in ownership or amount is involved. TDS AO may like to ask for the Identity Proof and PAN Card of buyer along with the documents related to Transfer of Properly and the proofs of payment made to verify the Amount of Property, Date of Payment, Property Details etc.

The aforesaid correction requests will be distributed equally to TDS AOs of the region to which the PAN of the buyer belongs and the same will be available in the form of tickets in their TRACES inbox under Tickets menu. The following procedure may be used to approve/reject these tickets:

i. Click on Tickets menu
ii. Click on inbox
iii. Click on the corresponding Ticket Number
iv. Download the attached documents from Communication Details tab
v. Click on Action
vi. Select 26QB tab to see details of correction
vii. Click on Approve/Reject, as the case may be.

What are the various types of defaults that may get generated on 26QB processing?

Ans: Following are the types of Defaults that may get generated on 26QB processing:—

1) Short Deduction: Short deduction is computed when the rate at which TDS Deducted is less than 1%.

Short Deduction Computation u/s 200A

Sr. No. Section Code Amount Paid / Credited as per 26QB (Rs.) TDS Deposited as per challan (s) (Rs.) Rate at which Deposited as per 26QB (%) TDS Rates as per Act (%) TDS Deductible (1%* Amount Paid/credited as per 26QB) (Rs.) Short Deduction (Rs.) (Col 7- Col 4)
1 2 3 4 5 6 7 8
1 194-IA 9252000.00 9252.00 0.10 % l % 92520.00 83268.00

2a) Late Payment Interest: When deductor deposits the TDS after due date of challan deposit, it is a case of late payment and interest will be charged accordingly. Late payment interest will be charged @ 1.5% per month from the date of tax deduction to date of tax deposition.

Late Payment Interest Computation u/s 200A read with Sec. 201(1A)

Sr. No. Date of Deduction as per 26QB (dd-mmm-yyyy) Due Date for TDS Deposit (dd-mmm-yyyy) Date of Deposit as Per OLTAS (Challan) (dd-mmm-yyyy) TDS amount consumed from challan (Rs.) Period of Delay in Months (Col 4 – Col 3) Interest on Late Payment U/S 201 (1A)(Rs.)(Col 5 * Col 6*1.5%
1 2 3 4 5 6 7
1 28-Feb-l4 7-Mar-l4 10-Mar-I4 6120 1 99

* Due date of TDS deposit will be by 7th of the next month of the month for which transaction is reported.

3a) Late Deduction Interest: When deductor does not deduct the TDS amount on the date of Payment/Credit, then, Interest on Late deduction is computed i.e. if the date of deduction is after the date of payment credit, then the late deduction interest is computed. Late deduction interest is charged @ 1% per month from date of transaction to date of tax deduction.

Late Deduction Interest Computation u/s 200A read with Sec. 201(1A)

Sr. No. Date of Payment/credit as per 26QB (dd-mmm-yyyy) Due Date of Deduction (dd-mmm-yyyy) Date of Deduction as Per 26QB (dd-mmm-yyyy) TDS Deductible (1% * Amount Paid/credited as per 26QB) (Rs.) Period of Delay in Months (Col 4-Col 3) Interest on Late Deduction U/S 201 (1A)(Rs.)(Col 5* Col6*1.5%
1 2 3 4 5 6 7
1 27-Feb-14 27-Feb-l4 10-Mar-14 6620 2 132

*Due date of deduction will be date of payment/credit whichever is earlier.

3b) Interest on Short Deduction Short deduction interest is calculated @ 1% per month on Part of the month from the date on which tax was deductible to the date of the processing of statement. Please note that ‘interest on Short Deduction’is provisional in nature. As you pay the short deduction default amount, the corresponding interest (i.e interest on short deduction) would be reversed and the “Interest on Late payment” or “Interest on late deduction” shall be levied appropriately, as the case may apply.

Short Deduction Interest Computation u/s 200A read with Sec. 201(1 A)

Sr. No. Short Deduction (Rs.) (as per Col 8) Date of Payment/Credit as per 26QB (dd-mmm-yyyy) Order Passed Date as per intimation (dd-mmm-yyyy) Period of Delay in Months (Col 4-Col 3) Interest due to short deduction (Rs.) (Col 2 * Col 5 *1%)
1 2 3 4 5 6
1 83268.00 7-May-14 12-Feb-16 22 18304.00

4a) Late Filing Fee: As per section 234E, where a person fails to file the TDS/TCS statement within the due date prescribed in this regard, and then he shall be liable to pay, by way of fee, a sum of Rs.200 for each day during which the failure continues. Fee amount will not exceed TDS deductible as per 26QB filed.

Late filing fee Computation u/s 234E

Sr. No. Due date of Filing of 26QB* (dd-mmm-yyyy) Date of deposit of Challan (dd-mmm-yyyy) Delay in Filing (No. of Days) (Col 3-Col 2) Fee per Day(Rs.) Total Fee (Rs.) (Col 4* Col 5) Total TDS Deductible (1%* Amount paid/credited as per 26QB) (Rs.) Fee Payable =Min (Col 6. Col 7) (Rs.)
1 2 3 4 5 6 7 8
1 7-Mar-14 10-Mar-14 3 200 600 6620 600

* Due date of filing will be by 7th of the next month of the month for which transaction is reported.

Note: 1) Interest is chargeable for every month or part of the month on the amount of such tax.

2) A month is considered to be a calendar month as per general clauses act.

Q . How can these defaults be resolved? Is online correction facility for form 26QB available now?

Ans: For the resolution of these defaults, the buyer needs to use the “demand payment” link on the TIN portal through URL- https://onlineservices.tin.egovnsdl.com/etaxnew/tdsnontds.jsp. For further detailed procedure of demand payment the buyer/deductor may refer to Question No.3.

However, if the buyer/deductor finds that the default has arisen due to wrong data entry in his 26QB statement, then the functionality for online correction of Form 26QB is now available to the deductors (buyers). For that the buyer can log in to www.tdscpc.gov.in and make the online correction request in the respective fields.

Q. Is there any approval required for online correction of 26QB statement? If yes, the details thereof ?

Ans: If the buyer makes correction using Digital Signature Certificate (DSC), then there is no need of TDS assessing officer (AO)’s approval for making correction in any field of 26QB form. But, if the buyer doesn’t make correction using Digital Signature Certificate (DSC), then following fields in 26QB online correction require approval of their TAN assessing officer (AO):

1. PAN of Buyer Details
2. PAN of Seller Details
3. Amount Paid/Credited – Amount payable to the Transferor/Seller
4. Date of Payment/Credit (Date of Payment to the Transferor/Seller). Note that the buyer will have to change the Financial Year as well if the changed Date of Payment/Credit lies outside the earlier financial year.
5. Date of Tax Deduction

If the buyer wants to change the PAN of buyer but doesn’t make correction using DSC, then after the successful submission of correction request, an approval request will be automatically sent simultaneously to both, PAN of Seller and Updated PAN of Buyer and status will be shown as “Pending for PAN approval” in the inbox of buyer. After getting their approval, an approval request will be automatically sent to the TDS assessing officer and status will be shown as “Pending for AO approval” in the inbox of the buyer. However, if the same request is made using DSC then AO approval will not be required and only approval from PAN of Seller and Updated PAN of Buyer will be required.

If the buyer wants to change the PAN of seller but doesn’t make correction using DSC, then after the successful submission of correction request, an approval request will be automatically sent to the PAN of previous Seller and status will be shown as “Pending for PAN approval” in the inbox of buyer. After getting the approval of previous seller, an approval request will be automatically sent to the TDS assessing officer and status will be shown as “Pending for AO approval” in the inbox of the buyer. However, if the same request is made using DSC, then AO approval will not be required and only approval from PAN of previous Seller will be required.

NOTE: In all the cases where approval by AO is required, the dcductor will be prompted to approach the TDS assessing officer with hard copy of the correction request. The dcductor/buyer should carry his Identity Proof & PAN Card along with the documents related to Transfer of Property and the proofs of payment made, for verification at the end of Assessing officer.

Q. Is the intimation letter and justification report sent by CPC -TDS password protected? If yes, what is the password to open the same?

Ans: Yes, the attached document containing the intimation letter and justification report sent by CPC -TDS is password protected. To open the PDF, enter the first four characters of your PAN in capital letters, followed by an underscore (_) and date of payment/credit in the format DDMMYYYY. For e.g., if your PAN is ABCD12345E and date of payment/Credit as regular statement is 30-Sep-2012, enter password as ‘ABCD_30092012’

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