Consequences of failure to deduct tax at source by purchaser of immovable property above Rs. 50 Lacs:
As per section 194IA w.e.f. 01.06.13, 1% TDS will be applicable on sale/transfer of immovable property (other than agricultural land) where consideration exceeds Rs 50 lakhs. Here the buyer of the property needs to deduct the said TDS before making the payment to the seller.
At the first instance, as per S. 201(1), assessee shall be deemed as an assessee in default for failure to deduct or pay or for late payment of any TDS on immovable property. [This is subject to saving provisions contained in proviso to S. 201(1) by way of form 26A formalities].
There could be two situations:
- Iftax deducted is not deposited by the 7th of next month of the month of deduction. But is deposited at a later date [Challan cum statement in 26QB – Rule 31A(4A)]
- If tax is not deducted at all
In first scenario where tax is not deposited by due date, interest at 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. [S. 201(1A)]
In the second scenario, if tax is not deduct at all then interest at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted. [S. 201(1A)]
- In case of purchase of immovable property as stock in trade. 30% of purchase consideration payable to resident shall be disallow u/s 40(a)(ia) w.e.f. A.Y. 2015-16, subject to saving provisions contained in second proviso to s. 40(a)(ia) r.w. proviso to S. 201(1) by way of form 26A formalities.
- If the assessee fails to deduct whole or any part of tax as required above [Situation (b) above] , he shall be liable to pay penalty u/s 271C of a sum equal to amount of tax which he failed to deduct.
- If asessee, without good and sufficient reasons, has failed to deduct and pay such tax. A discretionary penalty may be levied u/s 221 by the AO, subject to max. of tax in arrears.
- Late fees u/s 234E shall also be applicable, since Form 26QB is a ‘statement’ for the purpose of section 234E r.w.s. 200(3) read with Rule 31A(4A).
Further, for filing statement in 26QB after expiry of one year from time prescribed for filing such statement, or for furnishing incorrect information in statement 26QB, discretionary penalty u/s 271H [read with S. 200(3)] may also be levied from Rs. 10,000/- to Rs. 1,00,000/-.