As per the provisions of the income tax act, every person is required to file an income tax return within the specified time and report their income details. The process of tax collection is done via two ways – tax deduction at source and advance tax. This ensures that the government has a continuous flow of revenue.
Furthermore, the payer is responsible for deducting the tax at source and depositing it with the government within the specified time. It is mandatory for the payer to obtain a Tax Deduction Account Number(TAN) in order to make the payment. Once the tax is deposited, the payer is also required to file a TDS return reflecting the transactions and the tax deposited with the government. This would allow the payee to claim the credit of the tax deposited. Once the return filing is completed, the payer is required to issue a TDS certificate to the payee.
Form 16B is one of the TDS certificates that is issued by the payer. We shall now discuss Form 16B in detail.
What is Form 16B?
Form 16B is a TDS certificate that the payer must issue in case the provisions of section 194IA are attracted.
In simple terms, Form 16B is required to be issued by the purchaser of the immovable property to the seller. In such a case, the buyer is required to deduct tax at source at 1% of the consideration amount. In case the seller does not provide the PAN details, tax at a higher rate of 20% will be deducted from the consideration.
The deduction made by the purchaser of the asset needs to be deposited with the government within the specified time. Once the tax is deposited, the purchaser is required to issue Form 16B to the seller that contains the details of the tax deducted.
Features of Section 194I TDS on Sale of Property
The following are some of the features of section 194IA of Income Tax Act, 1961:
- The buyer shall deduct TDS before making payment to the seller. The tax rate of 1% is levied on the total sale consideration.
- No tax is deducted if the sale consideration is less than Rs. 50 lakhs.
- In case of payment by instalments, tax has to be deducted on each instalment.
- Consideration for the transfer of immovable property includes club membership fee, car parking fee, electricity and water charges, maintenance fee, or any other charges. The tax has to be deducted on the entire consideration @1%.
- The requirement of obtaining a Tax deduction account number is not applicable to the person deducting the tax.
- The tax deducted at the source needs to be paid to the government within 30 days from the end of the month in which it was deducted.
- After depositing the tax to the government, the buyer shall furnish the TDS certificate to the seller in form 16B. The same can be obtained from the TRACES website.
- Immovable property includes building part of a building, and land(other than agricultural land)
- Tax is deducted at source @20% in case the seller does not provide PAN to the buyer
What are the Components of Form 16B?
The following are the few major components of Form 16B:
- The PAN of the seller
- The PAN of the buyer
- Financial year in which the transaction took place
- Payment acknowledgment
- Name and address of the deductor
- Name and address of the deductee
The above details would be used at the time of filing of the income tax return for the particular financial year.
What is Form 26QB Under Income Tax Act, 1961?
Form 26QB is a return cum challan that is used for depositing the tax due to the government. This form is used where the provisions of section 194IA of the Income Tax Act, 1961 get attracted.
It is important to furnish the Form 26QB within 30 days from the end of the month in which the tax is deducted by the purchaser. In a case where the payments are made via installments, Form 26QB is required to be filed for each such installment.
How To Pay Tax Through Challan 26QB?
The following are the steps to pay the tax through challan 26QB:
Step 1: Log in to https://www.tin-nsdl.com/. Under the ‘services’ tab click on e-payment: Pay Taxes Online. A new window will open as below. The taxpayer can click on TDS on the property (Form 26QB)
Step 2: Once the taxpayer click on ‘proceed’. A new window will open as shown below:
- In the tax applicable section, 0020 should be chosen if the taxpayer is a corporate payer and 0021 for a non-corporate payer.
- Other information such as residential status, PAN of the buyer, PAN of the seller, complete address of the property, tax amount to be deposited, etc
Step 3: Once all the relevant information is provided, there are two modes of payments- e-tax payment immediately (through net banking facility) and e-tax payment on the subsequent date (e-payment of taxes by visiting any of the Bank branches). The taxpayer can select one of the payment modes and proceed further.
- If the net banking facility is chosen, the taxpayer can log in to their net banking and pay online. Once the payment is successful, the bank allows the taxpayer to print the Challan 280.
- In the case of offline payment, an online receipt with a unique acknowledgment is generated. The taxpayer can pay at any of the authorised banks with the help of this challan.
How to Download Form 16B?
The following are steps that need to be followed by the taxpayer:
Step 1: For a first-time user, registration on the Official TRACES website is mandatory. The taxpayer should register as a taxpayer with the PAN and the challan number. The registration screen would look like below:
Step 2: Once the registration is complete, the taxpayer will be able to obtain Form 16B which can be issued to the seller. The seller can check the tax deducted in his Form 26AS within seven days of payment. The details will be reflected in the section “Details of Tax Deducted at Source on Sale of Immovable Property u/s 194(IA) [For Buyer of Property]”.
Step 3: In order to download form 16B, the taxpayer can log in to TRACES, and under the download tab, click on “Form-16B(for the buyer)” as shown below:
Step 4: The taxpayer needs to provide the details such as the PAN of the seller along with the acknowledgment number and click on proceed.
Step 5: Once the required information is entered, a request can be submitted to the department.
Frequently Asked Questions
The deductor is mandatorily required to issue Form 16B to the deductee within 15 days from the due date for furnishing Form 26QB. Form 16B can be generated and downloaded from the TRACES website.
Yes, it is mandatory for the payer to possess a valid TAN. The payer must have a TAN through which he/ she can deposit the tax collected with the government. It is important to note that the payer must quote the TAN on all the necessary communication with the Income Tax Department.
However, as an exception, due to genuine hardship faced by the taxpayers, deductors under section 194-IA can file their TDS returns without a TAN. the deductor needs to file a return cum challan Form 26QB. On the completion of the filing of Form 26QB, it takes up to 7 days for the TDS to reflect in the account of the deductee.
No, surcharge and education cess are not applicable on any TDS rates. The deductor must deduct the tax at source at 1% on the consideration payable by the buyer to the seller.