The intricacies involved in property transactions can present significant challenges for both sellers and buyers, especially when it comes to navigating the complex realm of taxation associated with such transactions.
While the primary responsibility of deducting and remitting Tax Deducted at Source (TDS) rests with the buyer, it is crucial for the seller to provide accurate information and necessary documents to ensure the proper implementation of TDS. As TDS is deducted from the consideration received by the seller, it becomes essential to facilitate the process effectively. In cases where the seller's income is either non-taxable or falls below the TDS rate, there is an opportunity to claim a refund of the deducted amount. Therefore, the seller's cooperation in furnishing the required details is instrumental in ensuring a smooth TDS execution.
In cases where a property is jointly owned and involves multiple sellers, it is imperative for all sellers to provide the necessary documents and details to the buyer. This includes conveying information about each seller's respective share in the property. By doing so, the buyer can appropriately allocate the payment according to the ownership percentage of each individual and deduct the applicable TDS amount accordingly.
Failure on the part of the seller to provide these essential details can pose challenges for the buyer in executing the TDS process accurately. It is equally important for joint buyers to fulfill their individual responsibilities by making TDS payments in proportion to their respective shares. This collaborative effort ensures that the TDS process is carried out correctly and in compliance with the relevant laws and regulations.
Ultimately, it is in the best interest of both the buyer and the seller to work together, sharing the necessary information and fulfilling their respective obligations, to ensure a seamless and legally compliant execution of the TDS process.
After receiving payment from the buyer, it is essential for the seller to promptly request a TDS (Tax Deducted at Source) certificate. The seller should then carefully examine the TDS certificate to ensure the accuracy of the provided details, including the TDS amount, PAN (Permanent Account Number) and name information, Challan Identification Number (CIN), and deposit date.
If any discrepancies or inconsistencies are identified, it is important for the seller to promptly notify the buyer and address the issue accordingly.
Subsequently, a few weeks after the buyer has deposited the TDS amount, it is advisable for the seller to review their Form 26AS. This form serves as a comprehensive statement of tax credit and provides a record of the tax amount deducted on behalf of the taxpayer. By verifying Form 26AS, the seller can confirm whether the TDS amount has been appropriately credited to their account.
Performing these necessary steps ensures that the seller maintains accurate records and remains informed about the TDS process, promoting transparency and compliance with tax regulations.
In cases where the seller's tax liability is lower than the amount of taxes deducted, it is important to understand the process of claiming a refund.
If the seller's total income, including the proceeds from the property sale, falls below Rs 5 lakh, they are eligible for a tax rebate under Section 87A, which effectively reduces their tax liability to zero. In such situations, the seller can claim a refund for the TDS amount deducted by the buyer, which is Rs 80,000 in this case.
Alternatively, if the seller's only source of income is the capital gains derived from the sale of the property, it is possible to claim a refund of the TDS amount by meeting certain conditions. This can be achieved by reinvesting the long-term capital gain in a residential property or through the purchase of capital gain-exemption bonds, commonly referred to as 54EC bonds, within the stipulated period and investment limit.
By understanding the provisions and eligibility criteria, sellers can take advantage of these opportunities to claim a refund of the TDS amount, ensuring proper utilization of their funds and compliance with the tax regulations.
If the seller meets the eligibility criteria, they can claim a refund of the Tax Deducted at Source (TDS) by filing an income-tax return. When filing the income return, the TDS amount deducted can be adjusted against the seller's tax liability. If the seller does not have any tax liability, the TDS amount will be credited as a refund against their Permanent Account Number (PAN).
However, it should be noted that the tax return can only be filed after the end of the relevant financial year in which the sale took place, which may require some time.
To avoid a substantial blockage of funds in the form of TDS, sellers have the option to apply for a lower tax withholding certificate under the provisions of the Income-Tax Act, 1961. Seeking professional advice is strongly recommended to ensure compliance with TDS regulations and to avoid any potential legal or financial consequences. By doing so, sellers can navigate the TDS refund process effectively and ensure adherence to applicable tax laws.