What Is Tax Deducted at Source?: Understanding the Basics and Its Significance
What Is Tax Deducted at Source?: Tax Deducted at Source is a full form of TDS. In this write-up, we will discuss Tax Deducted at Source and everything related to TDS such as rates and types of TDS, Advantages of TDS, TDS Deduction Rules, and Provisions. To understand the concept of Tax Deducted at Source on sale of the immovable property first we have to know what is TDS and its basics?.
In simple words, TDS stands for tax deducted at source. Tax deduction at source is a means of collecting tax on income, dividends, or asset sales.
It requires the buyer or recipient of service to deduct tax on or before paying the balance to the seller or supplier of service. Under the provisions of the Indian Income Tax Act, 1961
Tax Deducted at Source is always payable on the earnings so it is important to be aware that the liability to pay TDS is applicable only on the seller or supplier of the service. It is important to deducted TDS before making payments. Tax Deductions can be made on all types of transactions such as cash, cheque, or credit.
What are the Advantages of Payment of Tax Deducted at Source?
The amount deducted under TDS is further deposited with various government agencies.
Payment of TDS has various advantages which are as follows :
>Deducting TDS at source prevents tax evasion.
>You can collect Tax duly and in a timely manner.
>A large number of people come under the tax net.
>The collection of TDS is a steady source of revenue for the government.
Who Can deduct TDS?
Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such a specified payment.
But no TDS has to deduct if the person making the payment is an individual or HUF whose books are not required to be audited.
Following is the list of deductors liable to deduct TDS:
>Hindu Undivided Family
>Body of Individuals
>Association of Individuals
Method of Deduction
As commonly known, TDS is deducted on the payments made to the receiver. It means that the payments are done to the receiver after deduction of appropriate tax for the income in question. The amount of TDS that the receiver is liable to pay is deducted from the payment the receiver is liable to receive and the remainder is paid out. It is important to note that the liability to deduct TDS is of the deductor. For instance, in case of selling of immovable property, the buyer is the deductor and the seller is the TDS deductee.
Now lets us have a look at what is Tax Deducted at Source on sale of immovable property?
TDS ON SALE OF IMMOVEABLE PROPERTY
As per the Finance Bill of 2013, TDS is applicable to the sale of immoveable property wherein the sale consideration of the property exceeds or is equal to Rs 50,00,000 (Rupees Fifty Lakhs). Sec 194 IA of the Income Tax Act, 1961 states that for all transactions with effect from June 1, 2013, Tax @ 1% should be deducted by the purchaser of the property at the time of making payment of sale consideration. The tax so deducted should be deposited to the Government Account through any of the authorized bank branches.
Along with other taxes, there is one more responsibility of the buyers which is Tax Deduction at Source (TDS).TDS is now applicable for the purchase of immovable properties like a building, a part of a building, or purchasing a piece of land. It is applicable for the properties that cost over ₹50 lakhs. TDS on sale of the property was introduced in the Finance Act of 2013-14. As per Section 194 IA of Income Tax Act 1961, TDS is applicable for all transactions as a part of imposing a tax on any capital gain that is taking place from June 1, 2013, onwards.
Important Points to be Kept in Mind for Deduction of Tax:
>property transactions of ₹50 Lakhs and above
>Tax will be collected at a 1% rate
>The purchaser has to deduct the required amount of tax at the time of purchase while making payment of the selling consideration to the seller
>You have to deposit this tax to the Government
>You have to make Tax payment through an authorized bank
>Agricultural land is excluded from the purview of this deduction
>If the payment is made by installments, then TDS has to be deducted on each installment paid
Agricultural lands that are excluded from Tax Deducted at Source at the time of sale transaction are defined as:
>The land that is not situated within the jurisdiction of any Cantonment Board or Municipality that is having a population of at least 10,000
>land should be more than 2 km away (Aerial distance) from a Cantonment Board or Municipality in case the population of the municipality is between 10,000 and 1,00,000
>The land should be more than 6 km away (Aerial distance) from a Cantonment Board or Municipality in case the population of the municipality is between 1,00,000 and 10,00,000
>A land should be more than 8 km away (Aerial distance) from a Cantonment Board or Municipality in case the population of the municipality is more than 10,00,000
The land will not be considered as Agriculture Land, if:
a) The land is situated within the jurisdiction limits of Municipality or Cantonment Board having a population of not less than 10,000; or
b) It is situated in an area falling within the below limits:
The population of Municipality = Distance from Municipality/ Cantonment Board
>10,000 but ≤ 1,00,000 = Within 2 km
>1,00,000 but ≤ 10,00,000 = Within 6 km
>10,00,000 = Within 8 km
FORM/CHALLAN IN WHICH PAYMENT CAN BE MADE OR FILE RETURNS
The TDS on the immovable property has to be paid using Form 26QB within 30 days from the end of the month in which TDS was deducted. After depositing TDS to the government, the buyer is required to furnish the TDS certificate in form 16B to the seller. This is available around 10-15 days after depositing the TDS.
WHAT IF THERE IS A MutipLE buyer OR seller?
The Form 26QB challan has to be filled by each buyer for every unique buyer-seller combination for their respective share. For example, in the case of one buyer and two sellers, two forms have to be filled in. Similarly, if there are two buyers and two sellers, then four forms will have to be filled.
Which Document One has to Submit?
- PAN of the buyer(s) and the seller(s)
- Address and Phone number of the buyer(s) and the seller(s)
- Property sale deed
- Challan details
Steps to Fill form 26QB :
1. Go to the TIN NSDL website ( ).
2. Under ‘TDS on sale of the property’, click on “Online form for furnishing TDS on property (Form 26QB)”
3. Select the applicable challan as “TDS on Sale of Property”.
4. Fill the complete form as applicable.
User should be ready with the following information while filling the form 26QB :
- PAN of the seller & buyer
- Communication details of seller & buyer
- Property details
- Amount paid/credited & tax deposit details
Submit the duly filled form to proceed. A confirmation screen appears. After confirming, a screen appears showing two buttons as “Print Form 26QB” and “Submit to the bank”. A unique acknowledgment number displays on the screen. It is advisable to save this acknowledgment number for future use.
Click on “Print Form 26QB” to print the form. Then click on “Submit to the bank” to make the required payment online through internet banking. Then proceed to the payment page through the internet banking facility of various banks. For a list of authorized banks, please refer to online services
6. On successful payment, a challan counterfoil will be displayed containing CIN, payment details, and bank name through which e-payment has been made. This counterfoil is proof of payment. Proceed to the TRACES portal( www.tdscpc.gov.in) after 5 days to download Form 16B.
Steps to Download Form 16B:
1. Register & login on the TRACES portal (tdscpc.gov.in) as a taxpayer using your PAN.
2. Select “Form 16B (For Buyer)” under the “Downloads” menu.
3. Enter the details pertaining to the property. Enter the Assessment Year, Acknowledgment Number, PAN of Seller, and click on “Proceed”.
4. A confirmation screen will appear. Click on “Submit Request” to proceed.
5. A success message on the submission of download requests will appear. Please note the request number to search for the download request.
6. Click on “Requested Downloads” to download the requested files.
7. Search for the request with a request number. Select the request row and click on the “HTTP download” button.
WHAT IS FORM 16B
Form 16B is a TDS Certificate which reflects that the amount deducted as TDS on Property by the Buyer has been deposited with the Income Tax Department.
Note: “This document had been written to provide update in simple/ lucid language. The Author shall not be responsible for any decision made based on the content of this document. Care has been taken to produce authentic and reliable information, however the users are expected to obtain professional advice before implementing.