Paying Rent Over Rs 50,000? Here Are The Rules For Deducting Tax

This article explains a recent Notification dated June 8, 2017, issued by the central government notifying the rules for withholding tax on rent payment exceeding Rs 50,000 to a resident by an individual or Hindu Undivided Family (HUF).

Prior to the amendment by the Finance Act 2017, the Indian tax laws required any person liable to pay rent to residents for use of any land/building exceeding an annual amount of Rs 1,80,000 to withhold tax at the rate of 10 percent. However, individuals and HUF not liable to tax audit under the tax laws, were excluded from the obligation of withholding tax.

In order to widen the scope of withholding tax, Finance Act 2017 has introduced a new provision in the tax laws to provide that individuals or HUF (other than those liable for tax audit under the tax laws) responsible for paying to a resident, on or after June 1, 2017, any income by way of rent exceeding Rs 50,000 for a month or part of month during the tax year, shall deduct an amount equal to 5 percent of such income as income tax thereon.

In order to reduce the compliance burden, Finance Act 2017 provides that the deductor is not required to obtain a Tax Deduction Account Number (TAN) and is liable to deduct tax only once in a tax year. The tax should be deducted at the time of credit or payment (whichever is earlier) of rent for the last month of the tax year or last month of the tenancy if the property is vacated during the year, as applicable.

Additionally, where the tax is required to be deducted at a higher rate in the absence of the Permanent Account Number (PAN) of the payee, such deduction is not to exceed the amount of rent payable for the last month of the tax year or the last month of the tenancy, as the case may be.

In order to harmonise the new provision with the existing rules, the Central Board of Direct Taxes (CBDT) has amended the existing rules to provide for the time and mode of payment of tax deducted at source to the central government account as well as the manner in which the certificate of tax deducted at source and the statement of deduction of tax are to be furnished by the payer.

The new provision which cast a tax deduction obligation on individual and HUF who are not liable for a tax audit, under the provisions of the tax laws, has come with effect from June 1, 2017. Such payers will need to ensure withholding tax compliance on payment of rent to residents in excess of Rs 50,000 per month within the timelines and in the form prescribed under the new rules to avoid any adverse consequences by way of additional fees, interest, penalty or prosecution.

Posted in TDS

How to rectify the excess TDS done while buying a property

The purchase and sale of immovable property in India is subject to Tax Deduction at Source (popularly known as TDS) provisions under Income Tax Act.

The buyer of the property is required to deduct tax (TDS) from the consideration payable to the seller.

How much TDS is to be done?
It depends upon the Residential status of the seller.
In case the seller is a Resident Indian – Deduct tax at the rate of 1% from the sale value, if the sale value exceeds Rs.50 lakhs. For example,
• for a property of Rs.40,00,000 – No need to deduct tax (TDS)
• for a property of Rs.50,00,000 – deduct at 1% i.e., Rs.50,000
• The buyer of the property, has to pay the taxes online using Form 26QB quoting the PAN of both buyer and seller.
• Issue a certificate in Form 16B to the seller as a proof of TDS (this form to be downloaded from the Income Tax website)
In case seller is Non Resident Indian (NRI) – Deduct tax at a higher rate. The basic exemption of Rs.50 lakhs is not applicable in case of NRI sellers. For example,
• For a property of Rs.1,00,00,000 or less – deduct tax at 20.60%
• For a property of Rs.1 Cr and above – deduct tax at 23.69%
• Pay the taxes online using Challan 281 quoting the TAN of the buyer and the PAN of the seller. (Note: The buyer of the property has to obtain Tax Deduction at Source Number (TAN))
• File quarterly eTDS return (Form 27Q) and issue Form 16A to the seller as a proof of TDS

What happens if the buyer erroneously deducts 10% (or any higher rate) instead of 1% in case of Resident sellers?

The buyer has to deduct 1% of the sale value. Suppose, on a sale value of Rs.70 Lakhs, Rs.70000 is to be deducted as tax (TDS); instead the buyer deducts and deposits Rs.90000. So, the question is how will the buyer get back this excess amount of Rs.20000? The income Tax department has worked out a mechanism to solve this problem. Though the buyer has deducted excess TDS, the credit will not go to the seller of the property. The seller of the property will get the credit for 1% and the excess amount will reflect in Part A2 of 26AS of buyer. The credit is available for claim in ITR of the buyer while filing his annual Income Tax Return.

What happens if the buyer deducts the correct amount, but uses a wrong procedure to pay the taxes in case of Non Resident sellers?

Instead of filing 27Q Form, the buyer has wrongly filed 26QB Form. In case of 26QB statement cum Challan processing, the system by default passes on the credit to the seller to the extent of 1% only. However, to obviate the difficulty of getting tax credit for NRI seller, the department will pass on the full credit of TDS to the seller by carrying out necessary changes in the System. (Note – this is done by the department as a onetime measure per assessee and the process of crediting the money will take some time; it won’t happen instantly)

In order to make this correction, the buyer has to raise a request for passing on the whole credit of the TDS to seller through sending a mail on email id “contactus@tdscpc.gov.in ” with Acknowledgement number.
Therefore, the procedure of deducting and depositing TDS is different for Resident and Non Resident Sellers. One has to correctly follow the rules to avoid unnecessary delay in TDS credits.

Source : Simplifiedlaws

Posted in TDS

Excess TDS done while buying a property

The purchase and sale of immovable property in India is subject to Tax deduction at Source as per provisions of Income Tax Act. The buyer of the property is required to deduct tax (TDS) from the consideration payable to the seller.

How much TDS is to be done?
It depends upon the Residential status of the seller.
In case the seller is a Resident Indian – Deduct tax at the rate of 1% from the sale value, if the sale value exceeds Rs.50 lakhs. For example,
• for a property of Rs.40,00,000 – No need to deduct tax (TDS)
• for a property of Rs.50,00,000 – deduct at 1% i.e., Rs.50,000
• The buyer of the property, has to pay the taxes online using Form 26QB quoting the PAN of both buyer and seller.
• Issue a certificate in Form 16B to the seller as a proof of TDS (this form to be downloaded from the Income Tax website)

In case seller is Non Resident Indian (NRI) – Deduct tax at a higher rate. The basic exemption of Rs.50 lakhs is not applicable in case of NRI sellers. For example,
• For a property of Rs.1,00,00,000 or less – deduct tax at 20.60%
• For a property of Rs.1 Cr and above – deduct tax at 23.69%
• Pay the taxes online using Challan 281 quoting the TAN of the buyer and the PAN of the seller. (Note: The buyer of the property has to obtain Tax Deduction at Source Number (TAN))
• File quarterly eTDS return (Form 27Q) and issue Form 16A to the seller as a proof of TDS

What happens if the buyer erroneously deducts 10% (or any higher rate) instead of 1% in case of Resident sellers?
The buyer has to deduct 1% of the sale value. Suppose, on a sale value of Rs.70 Lakhs, Rs.70000 is to be deducted as tax (TDS); instead the buyer deducts and deposits Rs.90000. So, the question is how will the buyer get back this excess amount of Rs.20000? The income Tax department has worked out a mechanism to solve this problem. Though the buyer has deducted excess TDS, the credit will not go to the seller of the property. The seller of the property will get the credit for 1% and the excess amount will reflect in Part A2 of 26AS of buyer. The credit is available for claim in ITR of the buyer while filing his annual Income Tax Return.
What happens if the buyer deducts the correct amount, but uses a wrong procedure to pay the taxes in case of Non Resident sellers?

Instead of filing 27Q Form, the buyer has wrongly filed 26QB Form. In case of 26QB statement cum Challan processing, the system by default passes on the credit to the seller to the extent of 1% only. However, to obviate the difficulty of getting tax credit for NRI seller, the department will pass on the full credit of TDS to the seller by carrying out necessary changes in the System. (Note – this is done by the department as a onetime measure per assessee and the process of crediting the money will take some time; it won’t happen instantly)

In order to make this correction, the buyer has to raise a request for passing on the whole credit of the TDS to seller through sending a mail on email id “contactus@tdscpc.gov.in ” with Acknowledgement number.

Therefore, the procedure of deducting and depositing TDS is different for Resident and Non Resident Sellers. One has to correctly follow the rules to avoid unnecessary delay in TDS credits.

Posted in TDS

Salaried tax payers to receive SMS alerts from Income tax dept.

As many as 2.5 crore salaried tax payers will now receive SMS alerts from the income tax department regarding their quarterly TDS deductions.

Finance minister Arun Jaitley launched the SMS alert service for tax deducted at source (TDS) for salaried class and the Central Bureau of Direct Taxes (CBDT) will soon offer this facility on a monthly basis as salaried class cannot afford to pay tax twice or indulge in litigations and hence they should be kept updated about their TDS deductions.

“Hence tax payers will benefit if they receive information through use of technology. So they can match the office salary slip and the SMS and at the end of the fiscal he will be clear about any possible tax dues,” Jaitley said.
He asked the CBDT to work towards making the grievance redressal system for TDS mismatch online so that there is no interface between the tax payer and the tax department.

Jaitley said e-Nivaran is working well for tax payers and the CBDT is taking several tax payer friendly initiave. The CBDT will soon extend this SMS facility to another 4.4 crore non-salaried tax payers.

“The frequency of SMS alerts will be increased, once the process for filing TDS returns is stremlined to receive such information on a real time basis,” the CBDT said.

CBDT chairperson said the tax department is encouraging people to register their mobile number on the e-filing website. Tax payer will initially receive a welcome message from the CBDT informing him about the facility and after that each assessee would be sent messages informing them about their respective TDS deductions.

The new step is an effort by the I-T department to directly communicate deposit of tax deducted through SMS alerts to salaried tax payers. In case of a mismatch, they can contact their deductor for necessary correction. Besides, SMS alerts will also be sent to deductors who have either failed to deposit taxes deducted ot to e-file their TDS returns by the due date.

Posted in TDS

Guidelines for online application of TAN

Application Procedure
(a) An applicant will fill Form 49B online and submit the form.
(b) If there are any errors, rectify them and re-submit the form.
(c) A confirmation screen with all the data filled by the applicant will be displayed.
(d) The applicant may either edit or confirm the same.
Acknowledgment
(a) On confirmation, an acknowledgment screen will be displayed. The acknowledgment consists of:
* A unique 14-digit acknowledgment number
* Status of applicant
* Name of applicant
* Contact details (address, e-mail and telephone number)
* Payment details
* Space for signature
(b) Applicant shall save and print this acknowledgment.
(c) Signature / Left thumb impression should only be within the box provided in the acknowledgment. In case of applicants other than ‘Individuals’, the authorised signatory shall sign the acknowledgment.
(d) Left hand Thumb impression, if used, should be attested by a Magistrate or a Notary Public or Gazetted Officer, under official seal and stamp.
Payment
(a) The fee for processing TAN application is 63.00 ( 55.00 application charge + 15.00% Service Tax).
(b) Payment can be made by
– demand draft or
– cheque or
– credit card / debit card or
– net banking
(c) Demand draft / cheque shall be in favor of ‘NSDL – TIN’.
(d) Name of the applicant and the acknowledgment number should be mentioned on the reverse of the demand draft / cheque.
(e) Demand draft shall be payable at Mumbai.
(f) Applicants making payment by cheque shall deposit a local cheque (drawn on any bank) with any HDFC Bank branch across the country (except Dahej). The applicant shall mention TANNSDL on the deposit slip. List of HDFC Bank Branches.

(g) Credit Card / Debit Card / Net Banking payment
Facility of making payment by credit card / debit card / net banking is not available for below mentioned categories:
– Central Government / State Government and
– Statutory / Autonomous Bodies
Persons authorised to make credit card / debit card / net banking payment for other categories are as below:
Category of applicant Authorized person whose credit card / debit card / net banking can be used for making the payment
Company/Branch/Division of a company Any Director of the Company
Individual (Sole Proprietorship) / Branch of individual business Self
Hindu Undivided Family (HUF) Karta
Firm / Branch of firm Any partner of the firm
Association of Persons/Body of Individuals/ Association of Persons (Trusts)/Artificial Juridical Person Authorized signatory covered under section 140 of Income Tax Act, 1961

Applicants making payment of application fee using credit card / debit card will be charged an additional charge of up to 2% (plus applicable taxes) of application fee by the bank providing payment gateway facility.
Applicants making payment through Net Banking facility will be charged an additional surcharge of 4.00 + service tax for payment gateway facility.
On successful payment by credit card / debit card / net banking an acknowledgment will be displayed. Applicant shall save and print the acknowledgment and send to NSDL as mentioned in section ‘Submission of Documents’ below.
Submission of Documents
(a) The acknowledgment duly signed, along with demand draft, if any, shall be sent to NSDL at
NSDL e-Governance Infrastructure Limited,
5th floor, Mantri Sterling,
Plot No. 341, Survey No. 997/8,
Model Colony,
Near Deep Bungalow Chowk,
Pune – 411016
(b) Superscribe the envelope with ‘APPLICATION FOR TAN – Acknowledgment Number’ (e.g. ‘APPLICATION TAN – 88301020000244’).
(c) Your acknowledgment and demand draft, if any, should reach NSDL within 15 days from the date of online application.
(d) Application will be processed only on receipt of duly signed acknowledgment and realisation of payment.
Contact NSDL
For more information
– Call PAN/TDS Call Centre at 020 – 27218080; Fax: 020 – 27218081
– e-mail us at: tininfo@nsdl.co.in

– SMS NSDLTAN Acknowledgement No. & send to 57575 to obtain application status.
– Write to: NSDL e-Governance Infrastructure Limited, 5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune – 411016

Posted in TDS

TCS Provisions – Board’s Clarification

The CBDT vide Circular No. 23/2016 dt. 24 June 2016 has clarified on FAQs of stakeholders reg. scope of the provisions and the procedure to be followed in case of the amended provisions of Section 206C of the Income Tax Act, as under:

CBDT Circular No. 23/2016 dt. 24 June 2016

In order to curb the cash economy, Finance Act 2016 has amended section 206C of the Income-tax Act to provide that the seller shall collect tax at the rate of one per cent from the purchaser on sale in cash of certain goods or provision of services exceeding two lakh rupees. Subsequent to the amendment, a number of representations were received from various stakeholders with regard to the scope of the provisions and the procedure to be followed in case of the amended provisions of Section 206C of the Act. The Board, after examining the representations of the stakeholders, issued FAQs vide circular.No.22/2016 dated 8th June, 2016. The Board has further decided to clarify the issue as regards applicability of the provisions relating to levy of TCS where the sale consideration received is partly in cash and partly in cheque by issue of an addendum to the above circular in the form of question and answer as under:

Question 1: Whether tax collection at source under section 206C(1D) at the rate of 1% will apply in cases where the sale consideration received is partly in cash and partly in cheque and the cash receipt is less than two lakh rupees.

Answer : No. Tax collection at source will not be levied if the cash receipt does not exceed two lakh rupees even if the sale consideration exceeds two lakh rupees.

Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.4 lakhs has been received in cheque and Rs.1 lakh has been received in cash. As the cash receipt does not exceed Rs.2 lakh, no tax is required to be collected at source as per section 206C (1D).

Question 2: Whether tax collection at source under section 206C (1D) will apply only to cash component or in respect of whole of sales consideration.

Answer: Under section 206C (1D), the tax is required to be collected at source on cash component of the sales consideration and not on the whole of sales consideration.

Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.2 lakhs has been received in cheque and Rs.3 lakh has been received in cash. Tax is required to be collected under section 206C (1 D) only on cash receipt of Rs.3 lakhs and not on the whole of sales consideration of Rs.5 lakh.

Posted in TDS

Validity of Sec 234E of Income tax Act

Validity of section 234E of income tax act is discussed in – Indhrani vs.DCIT (ITAT Chennai)

Section. 234E of Income tax Act 1961: Prior to the amendment to section. 200A w.e.f. 01.06.2015, the fee for default in filing TDS statements cannot be recovered from the assessee-deductor while processing the s. 200A statement. However, the AO is entitled to pass a separate order u/s 234E to levy the fee within the limitation period

The Assessing Officer has exceeded his jurisdiction in levying fee under Section 234E while processing the statement and make adjustment under Section 200A of the Act. Therefore, the impugned intimation of the lower authorities levying fee under Section 234E of the Act cannot be sustained in law. However, it is made clear that it is open to the Assessing Officer to pass a separate order under Section 234E of the Act levying fee provided the limitation for such a levy has not expired

Posted in TDS