TDS Filing in India is considered to be very tedious task. Trust me it is not. With the introduction of section 194IA w.e.f 1st June, 2013, now it is mandatory to deduct and deposit TDS for any property transaction over Rs 50 lakh. I shared the process of TDS filing in my post How to deduct TDS on Property Sale u/s 194IA. It is also mandatory to deduct TDS u/s 195, in case of NRI Seller. You may check my post, How to deduct TDS on NRI u/s 195? for more details. With reference to my these posts on TDS filing, i receive lot of queries on error / mistake in TDS filing. Main reason is people are not getting proper information from banks, builders, agents, lawyers, CA’s etc. As a result almost 70% people end up wrong TDS filing. In this post, we will discuss 7 common mistakes which can be avoided while TDS filing.
Error Free TDS Filing
1. TDS Filing in Advance: This is most common misconception and confusion among the property buyers. Banks and Sub-Registrar offices are responsible for this confusion. Normally Sub-Registrar office demand TDS Payment challan at the time of registration. On the other hand, banks also demand the same before final disbursement. Today morning, on a call one of my client told that he buying a property from NRI Seller. Now TDS applicable is 20.66%. His contribution in property transaction is 20%, bank is demanding proof of his contribution before registration. Secondly, bank is not willing to deduct TDS from Home Loan. Its a catch 22 situation. As i clarified in my other posts, TDS is due only at the time of making payment (Installment / Lump Sum) as the case may be. Full and Final Payment is due at the time of property registration and in many cases, only agreement executed is Sale Deed. In these scenarios, TDS can be deducted only at the time of making payment. I asked one of the bank executive that you are suggesting my client to pay in advance but what if the deal is terminated by either parties. How will buyer get the refund of TDS paid in advance.
2. Confusion between Sec 194IA and Sec 195: There is lot of mashup between these 2 sections. One of my reader who bought property from NRI, based on his lawyer & bank’s suggestion TDS filing was through challan 26QB & that too TDS of 20.66%. Let me again clarify that TDS of 1% u/s 194IA is applicable only in case of Resident Indian Seller. If the seller is NRI then TDS u/s 194IA is not applicable therefore buyer cannot use Challan 26QB for TDS filing. In case of NRI seller, TDS is deducted and deposited u/s 195 and challan for TDS payment is filed by the buyer after obtaining TAN. TAN is not required u/s 194IA. As i mentioned in point 1, if you are availing Home Loan and seller is NRI then you should discuss with your Home Loan provider on how to deduct and who will deduct the TDS. TDS is huge amount i.e. 20.66% almost equivalent to borrowers contribution in this case.
3. Multiple Buyer’s / Seller’s: Another confusion is on how to deduct TDS in case of multiple buyer’s and Seller’s. Most common query in case of Husband and Wife buyers is that can one party pay on behalf of other. To clarify, TDS is deducted in proportion of ownership in property of both buyers / sellers. A separate challan/s are required for each transaction. For example, in case of 2 buyers and 2 sellers, For TDS filing no of challans for each installment / lump sum payment is 4.
4. Date of Payment: Another confusion is regarding Date of Payment. Under the Negotiable Instruments Act, 1881 and as per legal interpretation by the Honorable Supreme Court of India, a cheque is an instrument negotiated by delivery. Which implies when the cheque is tendered / deposited, there is a presumption that payment would be realized in due course of time. Hence the date of cheque deposit / tender is considered to be the date of payment irrespective of the fact when it is actually presented for payment. In short, Date of cheque deposit / tender is considered as date of payment similar to cash payment. Here cheque is basically a payment instrument therefore this ruling is applicable for all payment instruments like Demand Draft / Banker’s Cheque etc. In Short, for TDS filing the date on which payment instrument is handed over to the seller is considered as Date of Payment.
5. TDS in case of Home Loan: Another common area of confusion, Banks don’t inform borrower to deduct TDS and insist on borrowers contribution proof. Banks don’t deduct TDS for disbursement from Home Loan. End result borrower either forget to deduct TDS or deduct complete amount from own contribution. It is not right way to deduct TDS. Best solution is that borrower should give it in writing to bank to deduct TDS. Bank can transfer TDS deducted from Home Loan disbursement to borrowers account. Borrower can complete formalities of TDS filing for each installment / disbursement and submit TDS certificate to Bank and the Seller. In case of NRI Seller, you can discuss regarding TDS filing in advance to avoid confusion at later stages.
6. Refund of TDS: Many sellers and even buyers claim refund of TDS u/s 194IA. In case of Resident Indian Seller, TDS deducted and deposited by buyer is non-refundable. TDS is deducted from seller’s contribution therefore buyer cannot claim refund. It can be only adjusted against capital gain by the seller. If the capital gain is nil then it can be carried forward as capital loss. In case of a NRI Seller, TDS deducted for TDS filing is 20.66% of gross consideration value whereas capital gain tax is normally much lesser amount. NRI’s can claim refund at the time of filing ITR.
7. Penalty for delay in deduction and / or deposit of TDS: Many buyers deposit TDS without including penalty for delay / deposit of TDS. It is always advisable to take professional help to calculate penalty in case of delay in either deduction or deposit of TDS.
All said and done, in case there is mistake or error in TDS filing. Buyer can get it corrected within 90 days of TDS filing, if the TDS payment was done through Bank. After 90 days, he can approach AO for any corrections. In case TDS filing was online and payment was through net banking then you can call helpline no of TDS-CPC to resolve the same. Helpline No’s of TDS – CPC are 1800 103 0344 or 0120 4814600.
Last but not the least, it is always advisable to include TDS details in Sale Agreement / Sale Deed along with break up of payment details. I do agree that TDS filing is one extra step but TDS filing is very simple and easy.
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