TDS or tax the deduction is the process of collecting income tax at the source by the Government of India sources. It deducts a kind of tax from the original sources of income. TDS is deducted as per the Indian Income Tax Act, 1961. TDS is controlled by the Central Board of Direct Taxes and is part of the Indian Revenue Service. TDS is an indirect way of collecting income tax. It is imposed on income derived from a number of financial products and transactions. For example,
Term deposits,
Incentives and commissions,
Dividends,
Payments for various services,
Sales, (Professional Fees, works Contracts Payments)
Rent
Rewards for real estate purchases
These are some of the sources of income with TDS Applicable.
TDS DEDUCTION RATES
The TDS deduction can range from 1% to 30% depending on the source of your income.
PROVISIONS UNDER INCOME TAX ACT, 1961
The Finance Act, 2013 Sec 194IA has introduced which provides for deduction of tax in case of making payment respect of consideration of the sale of immovable property (excluding rural agricultural land) to a residential transferee on from 1 June 2013.
It is the responsibility of the buyer to deduct TDS if the value of the transaction exceeds Rs. 50 lakhs. The buyer must deduct 1% TDS on the total consideration and deposit it in the government department.
The property included in Section 194 IA includes residential property, built-in or commercial property under construction as well as land excluding agricultural land. When TDS is deducted sometimes the total sale price, which is more than Rs.50 lacs can be paid in installments. The TDS in that case should be deducted from each installment, no matter how small.
DUE DATE OF MAKING PAYMENT
Deadline for submission of TDS Date and time of payment of each installment TDS deducted is to be submitted to the Income Tax Authority through Return cum Challan (Form 2Q QB) within 30 days of the month. The month in which the payment is made.
Example: If a taxpayer has made payment of sale consideration in the month of February, then the corresponding TDS should be deposited on or before (thirty days) 30th March.
WHAT IS FORM 26QB?
For information on TDS on property purchase, the form available on the TIN website has to be filled in Online Form 2Q QB. Generally, every person responsible for deducting TDS has to get TAN (Tax Deduction Account Number). However, in the case of TDS on real estate, the buyer is not required to take TAN. The buyer has to provide details like name, address, PAN, mobile number, and seller as well as buyer's email id in the form, 26 QB. The full address of the property, the total value of the consideration, the due date, etc. must also be provided along with the date of the contract. Buyers should also remember to submit Form 16B. This is derived from Traces and sellers will not be able to take a tax credit for TDS deducted if they do not fill-up the form or submit form 26QB late.
WHAT IS FORM 16B?
Form 16B is a TDS certificate issued in respect of tax credited to the Government account of the deductible (property seller) deductible (property seller).
PENALTY/INTEREST FOR NON-COMPLIANCE?
Section 194IA - Failure to comply with the provisions of 194IA will result in late payment of interest as well as a penalty under Section 271H of the Income-tax Act, 1961, will attract up to one lakh (minimum Rs. 10,000 / -).
The interest payable under section 201 (A) is 1% per month if the tax is not deducted and U/S 201 (IA) 1.5% in the case of deducted but not paid.
The purchaser will be responsible for paying late fees of Rs.200 per day as per 234E. However, the penalty should not be higher than the penalty for which TDS was required to be filed. If a person fails to deposit the deductible TDS required under or in accordance with the provisions of Chapter XVII-B, he is rigorous imprisonment punishable under U/s 276B, by not less than three months but may be extended to seven years.
POINTS TO NOTE:
Dealings in agricultural land is excluded from the requirements of TDS provisions. If the consideration is being paid in installments, TDS must also be deducted on each installment. If the total consideration exceeds Rs.50 lakhs, TDS to be deducted @1% on the entire amount and not the amount in excess of Rs.50 lakhs. If PAN is not provided by the seller, TDS @ 20% is deductible
DOCUMENTS REQUIRED FOR MAKING TDS PAYMENT ON IMMOVABLE PROPERTY:
A property buyer has to furnish the following documents with the TDS form.
PAN a number of both transferee (buyer) and transferor (seller).
Category of PAN of the transferee.
Full names of the buyer and seller.
Category of a pan of the transferor and transferor.
Complete address of the transferee and transferor.
Complete and correct address of the property purchased.
Details of the amount paid or credited.
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