Bought Prop­erty but not De­posited TDS? You may Get a Tax No­tice

The Economic Times - - Companies -

Ben­galuru: If you bought prop­erty worth more than ₹ 50 lakh and did not deduct tax at source (TDS) or failed to de­posit the amount with the in­come tax de­part­ment on time, you may have to pay a penalty of up to ₹ 1 lakh.

Sev­er­al­tax­pay­er­sre­cent­lyre­ceived no­tices from the de­part­ment for not do­ing so. Any­one buy­ing real es­tate worth more than ₹ 50 lakh has to deduct 1% of the price of the prop­erty be­fore pay­ing the seller. That 1% TDS has to be de­posited with the tax de­part­ment us­ing Form 26QB.

“The in­come tax de­part­ment re­cently matched the TDS data with the data they re­ceived from the prop­erty reg­is­trar for prop­erty transac- tions over ₹ 50 lakh. Wher­ever there was a dis­crep­ancy, ei­ther the buy­ers failed to deduct or de­posit the TDS, a no­tice has been sent,” said Vaib­hav San­kla, di­rec­tor, H&R Block.

While the rule has been in ef­fect since June 1, 2013, many buy­ers are un­aware­o­rof­ten­con­fused­abouthow to cal­cu­late the tax. TDS has to be cal­cu­lated on the to­tal sale price and not the amount ex­ceed­ing ₹ 50 lakh.

“Some­times to­tal sale price, which ex­ceeds ₹ 50 lakh in ag­gre­gate, may be payable in in­stal­ments. The TDS in that case must be de­ducted from each in­stal­ment no mat­ter how small the in­stal­ment is. Most peo­ple fail to do that,” said Ar­chit Gupta, founder,

In case the pay­ment is made in in­stal­ments, then TDS needs to be de­ducted at the time of mak­ing each pay­ment. This TDS, de­ducted each time while pay­ing the in­stal­ment, is to be de­posited with the de­part­ment by­wayof re­turn­cum­chal­lan(Form 26QB) within seven days of the fol­low­ing month of mak­ing the pay­ment.Fail­ingto­doso­can,apart­from the dues and late fil­ing in­ter­est, at­tract a penalty un­der Sec­tion 271H of up to ₹ 1 lakh. For those who have re­ceived a no­tice, the im­me­di­ate cor­rec­tive step to avoid pay­ing a penalty is to pay the TDS along with the ap­pli­ca­ble in­ter­est and late fil­ing fee. The in­ter­est payable un­der Sec­tion 201 is 1% per month if tax wasn’t de­ducted and 1.5% in case this was done but not paid. “This in­ter­est is cal­cu­lated on the TDS amount from the­da­teof pay­ment,whether­paidin lump sum or in in­stal­ments,” said San­kla. Take the ex­am­ple of a prop­erty pur­chased in Jan­uary 2015 worth ₹ 60 lakh where the first ₹ 20 lakh was paid that month and the rest in June that year. For the first in­stal­ment of ₹ 20 lakh, the in­ter­est will be ap­pli­ca­ble from Jan­uary on­wards, while that on the sec­ond pay­ment will be from June 2015.

There is also a late fil­ing fee un­der Sec­tion234E­forde­lay­ingth­ein­ter­est pay­ment of ₹ 200 per day, sub­ject to the max­i­mum of taxes due.

There may be some le­niency if the seller has al­ready paid cap­i­tal gains tax or claimed cap­i­tal gains ex­emp­tion (on the sale of prop­erty).

“The in­tent of the de­part­ment is that there is no tax eva­sion. So, if the seller has al­ready paid the taxes, the buyer can sub­mit Form 26A cer­tifi­cate from a char­tered ac­coun­tant and re­quest that penalty un­der Sec­tion 234E should not be levied,” said Gupta. Though this will save you from the late fil­ing fee, the in­ter­est un­der Sec­tion 201 will still ap­ply. Buy­ers should also re­mem­ber to is­sue Form 16B. “It is gen­er­ated via TRACES and the seller may not be able to take tax credit for TDS de­ducted in case of non-fil­ing or late­fil­ing of Form 26QB,” said Gupta. Penal­ties re­main the same for fail­ing to do so.

TDS has to be cal­cu­lated on the to­tal sale price and not the amount ex­ceed­ing 50 lakh

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