Wealthsane |

TDS on purchase of property | Form 26 QB filing | Section -194IA

Sachin Jain — Mon, 02 Sep 2024 12:46:03 +0000

When purchasing immovable property (such as a building, part of a building, or land, excluding agricultural land) where the sale consideration exceeds ₹50 lakh, the buyer must deduct tax at source (TDS) at the time of payment to the seller.

Let us understand the key points

TDS Rate: The buyer is required to deduct TDS at 1% of the total sale value.
Threshold: TDS is applicable only if the total purchase value exceeds ₹50 lakh.
Installment Payments: If the payment is made in installments (common in under-construction properties), TDS must be deducted on each installment paid.
Inclusive Consideration: The sale consideration includes all additional charges like club membership fees, car parking fees, electricity or water facility fees, maintenance charges, advance fees, or any other charges incidental to the transfer of the property.
TDS on Full Amount: Importantly, TDS is calculated on the entire purchase value, not just the amount exceeding ₹50 lakh. For example, if the property is purchased for ₹65 lakh, TDS must be deducted on ₹65 lakh, not just on ₹15 lakh (i.e., ₹65 lakh minus ₹50 lakh). This applies even if there is more than one buyer or seller.
No TAN Requirement: If the seller is a resident of India, the buyer is not required to obtain a Tax Deduction Account Number (TAN) to deposit the TDS.
PAN Requirement: The buyer must obtain the seller’s valid PAN for TDS deposit. Without the seller’s PAN, TDS must be deducted at a rate of 20%.
Timing of TDS Deduction: TDS should be deducted at the time of payment to the seller, including installment payments.
Form 26 QB : Form 26QB is a challan cum return statement that is required to file for the deposit of TDS on the property.
Payment of TDS: The TDS must be paid to the government using Form 26QB within 30 days from the end of the month in which the TDS was deducted.
Issuance of TDS Certificate: After depositing the TDS, the buyer must furnish the TDS certificate (Form 16B) to the seller. Form 16B can be obtained from the TRACES portal within 7-10 days after the TDS payment.

Consequences of Non/Late Filing of TDS Statements

For Buyer of Property:

Late Filing Penalty: If Form 26QB is not filed on time, a fee under Section 234E of the Income Tax Act will be levied. The buyer will incur a late fee of ₹200 per day for each day the default continues.
Additional Penalties: The buyer may also be liable for penalties related to late deduction, late payment, and interest thereon. A penalty under Section 271H may also be imposed by the Assessing Officer.

For Seller of Property:

TDS Credit: The seller will not be able to claim TDS credit if Form 26QB is not filed or is filed late.

Penalties/Late Fees/Interest on Non-Filing of Form 26QB

Non-Deduction of TDS: If TDS is not deducted, the penalty is 1% per month from the due date of deduction until the actual deduction.
Non-Payment of TDS: If TDS is deducted but not paid to the government, the penalty is 1.5% per month from the date of deduction until the date of payment to the government.
Late Submission of Form 26QB: If Form 26QB is not submitted or is delayed, a fine under Section 234E may be imposed at ₹200 per day until the form is submitted. This fine is in addition to any interest accrued.

You can also refer to a popular, old but relevant video of Miss Rounak Jain to understand the TDS on purchase of Property. Click on the image

Why Job Changes Can Lead to Higher Tax Liability?

Sachin Jain — Wed, 21 Aug 2024 07:59:54 +0000

Changing jobs brings new opportunities as well as challenges, especially financial ones. A common issue we've seen in this year's ITR filings is that clients with multiple Form 16s end up with higher tax liabilities. This isn't due to job changes themselves but because both the previous and new employers may under-deduct TDS, resulting in more in-hand salary than expected. Consequently, you'll need to pay the additional tax, along with interest, when filing your ITR. Let's understand this scenario in detail

Understanding Form 16

Form 16 is a certificate issued by an employer detailing the total amount of salary paid to an employee and the tax deducted at source (TDS) on that salary. It is crucial for filing your income tax return (ITR) as it serves as proof of the taxes you’ve already paid.

The Problem with Multiple Form 16s

When you change jobs within a financial year, you receive a Form 16 from each employer. While each employer deducts TDS based on the salary paid during their tenure, they may not account for your total income for the entire year. This can lead to under-deduction of TDS.

Here’s why this happens:

Different Employers, Different TDS Calculations: Each employer calculates TDS based on the salary they pay you, assuming that you will stay with them for the entire financial year. If you switch jobs, the new employer starts the calculation afresh without considering the income from the previous employer.
Standard Deduction and Tax Slabs: Both employers give you the benefit of standard deduction and apply tax slabs as if the salary they are paying is your only income for the year. This can result in a lower TDS being deducted than what is actually required.

By early planning & investing, you can ensure that your savings grow at a rate that outpaces inflation, preserving the purchasing power of your money over time.

Example Scenario

Let’s say you worked with Company A from April to September and then joined Company B from October to March. Both companies deduct TDS considering their respective payment periods. However, your total income for the year is the sum of salaries from both companies. Since each company doesn’t have a complete picture, TDS might be deducted at a lower rate than necessary.

Consequences of Under-Deducted TDS

Higher Tax Liability at Year-End: When you file your ITR, you may find that you owe additional taxes because the TDS deducted was insufficient.

Interest and Penalties: Under Section 234B and Section 234C of the Income Tax Act, you may have to pay interest on the unpaid tax liability due to under-deducted TDS.

How to Manage Multiple Form 16s

Inform Your New Employer: When you join a new company, inform them about your previous employment and provide them with details of your previous salary and TDS. This will help them calculate TDS more accurately.

Submit Form 12B: You can submit Form 12B to your new employer, which contains details of your income from the previous employer. This ensures that your new employer deducts TDS considering your total income for the financial year.

Review Your Form 26AS: Form 26AS is a consolidated statement of your tax deducted and deposited. Regularly review this form to ensure that TDS has been correctly credited to your account.

Estimate Your Total Income: Calculate your estimated total income for the financial year and determine the approximate tax liability. Compare this with the TDS deducted by both employers and pay any advance tax, if required, to avoid interest and penalties.

Conclusion

While job changes can offer great career growth, they also bring financial responsibilities, especially when it comes to managing taxes. By being proactive and ensuring accurate TDS deductions, you can avoid the shock of a higher tax liability at the end of the financial year

Types of ITR forms for filing income tax returns

Sachin Jain — Fri, 07 Jun 2024 14:49:09 +0000

There are currently seven different ITR forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. Each taxpayer must file their ITR every year before the due date, which is July 31st. The specific form a taxpayer needs to use depends on their income sources, total earnings, and classification (such as individual, Hindu Undivided Family (HUF), or company). Let's take a closer look at these forms:

1) ITR-1 OR SAHAJ

This IT return form is to be used by a resident individual whose total income for the year includes:

Income from Salary or Pension
Income from One House Property (excluding cases where a loss is carried forward from previous years)
Income from other Sources (excluding winnings from lottery and income from race horses)
Agricultural income up to Rs 5000

Who cannot file ITR-1 ?

Total income exceeding Rs 50 lakh
Agricultural income exceeding Rs 5000
Taxable capital gains
Income from business or profession
Income from more than one house property
Directorship in a company
Investments in unlisted equity shares at any time during the financial year
Ownership of assets (including financial interest in any entity) outside India, including signing authority in any account located outside India
Resident not ordinarily resident (RNOR) or non-resident status
Any foreign income
Tax deducted under Section 194N
Deferred payment or deduction of tax on ESOP
Brought forward loss or loss to be carried forward under any income head

2) ITR-2 | who can File?

This IT return form is to be use by an individual or a Hindu Undivided Family (HUF) whose total income for the year includes:

Income from Salary or Pension
Income from One House Property (excluding cases where a loss is carried forward from previous years)
Income from Other Sources (excluding winnings from lottery and income from race horses)
Agricultural income up to Rs 5000

Who cannot file ITR - 2 ?

This Return Form is not applicable for individuals whose total income for the year includes Income from Business or Profession. For reporting such income, you may need to utilize either ITR-3 or ITR-4.

3) ITR-3 | Who can file?

ITR-3 Form is intended to be used by those individuals or Hindu Undivided Families who are having income from a proprietary business or who engaged in a profession. Individuals falling under the below mentioned categories are eligible to file ITR-3:

Those engaged in a business or profession required to maintain books of accounts and/or undergo auditing
Individuals serving as Directors in a company.
Individuals who have made investments in unlisted equity shares at any point during the financial year.
The return may encompass income from House property, Salary/Pension, and Income from other sources.
Income derived from a person’s partnership in a firm.

4) ITR 4 or Sugam | Who can file?

The current ITR-4 form is applicable to individuals, Hindu Undivided Families (HUFs), and Partnership firms (excluding LLPs), who are residents and whose total income includes:

Business income under the presumptive income scheme as per sections 44AD or 44AE
Professional income under the presumptive income scheme as per section 44ADA
Salary or pension income up to Rs 50 lakh
Income from one house property, not exceeding Rs 50 lakh (excluding any brought forward loss or loss to be carried forward)
Income from other sources, with income not exceeding Rs 50 lakh (excluding income from lottery and race horses)

It’s important to note that individuals earning income from the above mentioned sources as freelancers can also choose the presumptive scheme if their gross receipts are not more than Rs 50 lakhs.The presumptive income scheme under sections 44AD, 44AE, and 44ADA is when an individual or entity opts to calculate its income based on a presumed minimum rate, typically a percentage of gross receipts or turnover in case of 44AD.44ADA, or based on the ownership of commercial vehicles in case of 44AE. However, if the business turnover exceeds Rs 2 crore, the taxpayer must file ITR-3.

Who can not file?

If your total income exceeds Rs 50 lakh,
If you receive income from more than one house property,
If you possess any foreign assets,
If you hold signing authority in any account located outside India,
If you earn income from any source outside India,
If you serve as a Director in a company,
If you have invested in unlisted equity shares at any time during the financial year,
If you are a resident not ordinarily resident (RNOR) or non-resident,
If you have foreign income, If you are assessable for the income of another person for which tax is deducted at the source in the hands of that person,
If tax payment or deduction has been deferred on Employee Stock Ownership Plans (ESOP),
If you have any brought forward loss or loss that needs to be carried forward under any income head.

5) ITR-5

ITR-5 is meant to be filed by the entities such as firms, LLPs (Limited Liability Partnerships), AOPs (Association of Persons), BOIs (Body of Individuals), Artificial Juridical Persons (AJPs), Estates of deceased individuals, Estates of insolvent individuals, Business trusts, and investment funds.

6) ITR-6

For companies other than those claiming exemption under section 11 (Income from property held for charitable or religious purposes), this return must be filed electronically only.

7) ITR-7

For individuals and entities, including companies, required to submit returns under section 139(4A), 139(4B), 139(4C), 139(4D), 139(4E), or 139(4F):

Return under section 139(4A) must be filed by any person receiving income derived from property held under trust or other legal obligation, wholly or partly for charitable or religious purposes.
Return under section 139(4B) must be filed by a political party if its total income exceeds the maximum amount not chargeable to income tax, without considering the provisions of section 139A.
Return under section 139(4C) must be filed by:
- Scientific research associations
- News agencies
- Associations or institutions referred to in section 10(23A)
- Institutions referred to in section 10(23B)
- Funds, institutions, universities, educational institutions, hospitals, or medical institutions.
Return under section 139(4D) must be filed by universities, colleges, or other institutions not required to submit returns of income or loss under any other provision.
Return under section 139(4E) must be filed by every business trust not mandated to furnish a return of income or loss under any other provision.

Return under section 139(4F) must be filed by any investment fund referred to in section 115UB, not obliged to furnish a return of income or loss under any other provision

Key Points to take way

Due Date: All taxpayers must file their ITR before July 31st each year.
Form Selection: The correct form depends on the taxpayer’s sources of income, total income, and classification (individual, HUF, company, etc.).

To file your ITR for FY 2023-24!

Schedule FA- Effect of Non-Disclosure of Foreign Assets while Filing ITR & Black Money Act

Sachin Jain — Tue, 28 May 2024 13:14:12 +0000

All the residents and ordinary resident of India as per income tax act, HUF, NRIs (specifically those who Returned to India and now resident), Foreign Citizens (OCIs, PIOs, Others), who either returned back to India on permanent basis or come to India for a longer duration of time and become Tax Resident in India as per NRI Income Tax rule of based on the number of days they reside in India. Once these NRIs, Foreign Citizens become Tax Residents in India, they are liable for fair and true disclosure of Foreign Assets and Income in a section called Schedule FA while filing their income tax returns in India. In case if it is not done, they might attract the penalty provisions of income tax act hence, it is very important to understand the disclosure of Foreign Assets and Income and its Implications on Returning NRIs/Other Tax Residents.

Requirement of schedule FA

As per the Indian tax act 1961, every ordinary tax resident individual who owns any kind of Foreign Assets inclusive of but not limited to Bank Account, Foreign Shares, Foreign Mutual Funds, Immovable Property Outside India or any other Foreign Asset, then it is mandatory for such individual to properly disclose all the information pertaining to such assets in schedule FA while filing his ITR.

If an individual has invested in any foreign assets (being shares or mutual funds in a foreign company, etc.) directly or holds stock options (ESOPs) of foreign companies, even then it is mandatory for such individual to fill schedule FA of his ITR.

What is The Black Money Act?

Black Money (Undisclosed Income and Assets) and Imposition of Tax Act, 2015 enforced in 2015. However, in recent 2-3 years, the tax authorities (Foreign Assets Investigation Unit ‘FAIU’), who are entrusted to investigate and implement the proceedings of Black Money Act, has started sending notices for non-compliances of this Act.

• Section 43 of Black Money Act empowers authorities for penalty for non-disclosure of foreign assets detail in ITR.

• Its provisions are applicable on Resident Individual i.e. Individual who is ordinary tax Resident of India.

• As per this provision, it is mandatory to provide information of foreign assets outside India while filing the ITR.

• Failure to disclose foreign assets in ITR – A penalty of Rs 10 Lacs per year i.e. the year in which the foreign assets were not reported in ITR. If non-disclosure is in more than one year, then Assessing Officer can levy penalty for each defaulting year.

• Further to above, section 3 of Black Money Act empowers to levy of tax on undisclosed Income or Foreign Asset. It provides straight tax @30%(Maximum marginal rate) on undisclosed Income or Foreign Asset.

• Further, as per section 41 of Black Money Act, if there is any taxes levied under this Act because of non-disclosure of income or Foreign assets, then a penalty of three times of the tax amount shall be levied as penalty. Hence, if any amount is found undisclosed under this Act, then total of 120% (30% plus 3 times of the tax amount) of that amount is payable under this Act.

Foreign Assets Investigation Unit (FAIU) – Proceedings To Investigate Foreign Assets Transactions

Income Tax Department has set up a separate department in all major cities of India to investigate the Foreign Assets Transactions. It is named as Foreign Assets Investigation Unit (FAIU). It is headed by an officer of Deputy Director of Income Tax (DDIT).

• The FAIU Department receives data from various sources (including foreign country income tax department under the agreement with that country for information exchange) eg. FATCA.

• When this department has reasons to believe that Foreign Assets information is not disclosed or disclosed incompletely/inaccurately, the FAIU Office can issues summon under section 131 of Income Tax Act to initiate the investigation.

• On receipt of the information from the foreign counterpart the FAIU office prepares a report and submit the same to higher authorities and on their approval, FAIU finalizes its findings.

• Many of NRIs/OCIs are also receiving notices u/s 131. Reason for the same is, FAIU gets foreign assets information however there is no ITR filed by these NRIs/OCIs, which gives reason to FAIU office to initiate an enquiry. Hence, for NRIs/OCIs, ITR filing is highly recommended to avoid this summon or other type of notices.

• If there are negative findings then proceedings of Black Money (Undisclosed Income and Assets) and Imposition of Tax Act, 2015 are initiated by this office to levy & collect penalty and taxes.

Note-Though provisions of foreign asset disclosures under Income tax act 1961 are not applicable to NRIs/OCIs living abroad. However, Income Tax Department (FAIU) gets information from the tax officials of foreign countries (under mutual information exchange clause of Tax Agreements between countries) and also some other sources. Hence, when there is no ITR filed by these NRIs/OCIs, then to confirm, FAIU issues notice to NRIs/OCIs. Hence, it is advisable for NRIs/OCIs that they file ITR in India to submit their non-resident status with the Tax Department.
However If an individual has a foreign bank account(s) and balance in total of all said foreign bank account(s) does not exceed Rs 5 Lakh, then penalty under section 43 of the Black Money Act cannot be imposed even if such bank account was not declared in schedule FA.

PPF vs. ELSS Mutual Funds: Where to invest?

Sachin Jain — Thu, 25 Apr 2024 14:31:21 +0000

Last week a client of ours called to understand a few things on taxation, out of them one of the queries was on year-end tax saving declaration & investments. Continuing the old norms, he decided to invest a lump sum amount of 1,50,000 towards the PPF account to benefit of section 80c of the income tax act. We suggested ELSS Mutual Funds but he denied saying it is risky & difference in return won’t be much.We happened to share the calculation along with the note which we are sharing here.

Let us assume:

1)You invest 1,20,000 every year in PPF for tax-saving
2)The lock-in period in PPF is 15 years, however, 50% can be withdrawn after 5 years.
3)The returns from PPF now are 7.1- 7.7%
4) What about risk? PPF is ultra-safe, and being run by the government of India, there is a huge comfort.

Let us assume:

1) You invest the same amount Rs 1,20,000 in ELSS tax-saving Mutual Fund schemes
2) Lock in period is 3 years
3) Returns are market-linked, however, historical returns of mutual funds from the last 15 years are north of 13-17%, but being conservative let us assume it to be 12% pre-taxes.
4) When you redeem mutual funds ( at maturity) returns above 1 lac are taxable at the rate of 10%, any capital gains arising until the redemption are not taxable.

Finally, let us check what you will make:

PPF

Invested amount of 10,000 per month
Total investment after 15 years = 1800000
Returns CAGR% = 7.1%
Returns: 14,54, 567
Taxes will be zero
Final Maturity Amount = 1800000+ 1454567 = 3254567 (32.5 lacs)

ELSS Mutual Funds

Invested Amount 10,000 per month
Total Investment after 15 years= 1800000
Returns CAGR% = 12% (assumed)
Returns:34,45,760
Tax @ 10% = 3445760 – 100000 ( remember we said above 1 lac) = 3345760*10% =334576
Returns after paying taxes = 3445760 – 334576 = 31,11,184
Final Maturity Amount = 1800000+ 31111184 = 4911184 (49 lacs)

You see, the difference between the two is large.

What about Risk?

We would not call ELSS mutual funds as risky, rather would call them volatile as they invest money in equities and chances of equities producing negative return over the long term is less at least that’s what we have seen in past .

With that note, We convinced him to add 30-40% of the corpus in ELSS to begin with, and the rest in PPF

Choose your investments wisely, weighing the facts & returns appropriately

Mutual funds investments are subject to markets risk, returns discussed here are not assured but a conservative assumption

Different Type of income tax notices one can receive in India.

Sachin Jain — Wed, 27 Mar 2024 13:20:50 +0000

With increased access to information and technology, the income tax department has become more active in sending tax notices and intimations to taxpayers. Upon receiving these notices, it's essential not to panic immediately. Some notices are merely for informational purposes, while others require your intervention and response within a specified timeframe. Today, in this blog, we'll delve into understanding the nature of these notices. This will empower you to better comprehend the situation and take appropriate action if you find yourself as the recipient of an IT notice.

1) Notice cum intimation U/S 143(1)-

Intimation or notice u/s 143(1) of Income Tax Act. 1961, is preliminary processing of return filed by you and its a computer generated automated message which lets the taxpayer know of any error that exists in his/her tax filing. It also makes comparison of income declared by assessee and income considered by the income tax department and based on that it shows if any refund is receivable or demand is payable.

2) Notice u/s 142(1)-

The Section 142(1) of the Income-tax act 1961 gives power to Income-tax authorities to issue a notice for more information and for further clarification about where a income tax return is filed and if the same is not filed, then to furnish the required information in a prescribed manner. However if you don’t comply with this notice and don’t reply then in such case, a penalty of Rs 10,000 can be imposed u/s 271(1) (b).

Your case also can go for “Best Judgement Assessment” u/s 144, where the assessment will be carried out as per the best judgment of the Assessing Officer on the basis of all the relevant material and information available with them.

Prosecution u/s 276D for up to 1 year with or without a fine can be initiated. Search u/s 132 can also be initiated.

3) Notice u/s 143(2)-

This is also known as scrutiny notice. If notice u/s 142(1) is issued and you have submitted documents and AO (Assessing officer) was not satisfied with the produced documents or may be you have not submitted documents or AO has not received any documents and the assessing officer has reason to believe that income is understated, less taxes paid or incorrect losses claimed, then Notice under Section 143(2) is issued which means your return has been selected for detailed scrutiny by your Assessing Officer and further information may be called upon.

4) Notice u/s 139(9)-

This is also known as defective return notice. Purpose of this notice is to correct errors in return and make sure that income tax return provide complete and precise information. This notice is generally issued in case

1) ITR is incomplete

2) Mismatch or missing tax information

3) TDS credit is claimed but corresponding income is not offer to tax or less offered in comparison to 26AS

4) Wrong ITR filed etc.

5) Notice u/s 148-

Section 148 of income tax act 1961 gives authority and power to the Assessing Officer to issue notice to a taxpayer whose income has not been properly assessed. This means that if the Assessing Officer has reason to believe and doubt that a taxpayer has not disclosed complete income or has provided an inaccurate information of it, officers can commence proceedings under this section.

6)Notice u/s 156-

Notice u/s 156 is also known as Notice for income tax demand notice. This notice is issued by the Assessing Officer when any tax, interest, penalty, fine, or any other sum is payable by the assessee as a result of any order passed under the Income Tax Act. The notice specifies the amount and the due date of payment for the same, which is usually 30 days from the receipt of the notice.

7) Notice u/s 245-

This is an intimation and informational notice.The notice u/s 245 is issued by income tax department to take confirmation from assessee’s side for adjusting the pending tax to be paid by assessee for any of the previous years from the current year’s refund. This proposed adjustment intimation allows taxpayers to respond and express whether they are in agreement or disagreement with the proposed adjustment.

Wealthsane |

TDS on purchase of property | Form 26 QB filing | Section -194IA

When purchasing immovable property (such as a building, part of a building, or land, excluding agricultural land) where the sale consideration exceeds ₹50 lakh, the buyer must deduct tax at source (TDS) at the time of payment to the seller.

Let us understand the key points

Consequences of Non/Late Filing of TDS Statements

For Buyer of Property:

For Seller of Property:

Penalties/Late Fees/Interest on Non-Filing of Form 26QB

Why Job Changes Can Lead to Higher Tax Liability?

Understanding Form 16

The Problem with Multiple Form 16s

Here’s why this happens:

Example Scenario

Consequences of Under-Deducted TDS

How to Manage Multiple Form 16s

Conclusion

Types of ITR forms for filing income tax returns

1) ITR-1 OR SAHAJ

Who cannot file ITR-1 ?

2) ITR-2 | who can File?

Who cannot file ITR - 2 ?

3) ITR-3 | Who can file?

4) ITR 4 or Sugam | Who can file?

Who can not file?

5) ITR-5

6) ITR-6

7) ITR-7

Key Points to take way

To file your ITR for FY 2023-24!

Schedule FA- Effect of Non-Disclosure of Foreign Assets while Filing ITR & Black Money Act

Requirement of schedule FA

What is The Black Money Act?

Foreign Assets Investigation Unit (FAIU) – Proceedings To Investigate Foreign Assets Transactions

PPF vs. ELSS Mutual Funds: Where to invest?

Let us assume:

Let us assume:

Finally, let us check what you will make:

PPF

ELSS Mutual Funds

You see, the difference between the two is large.

Choose your investments wisely, weighing the facts & returns appropriately

Different Type of income tax notices one can receive in India.

1) Notice cum intimation U/S 143(1)-

2) Notice u/s 142(1)-

3) Notice u/s 143(2)-

4) Notice u/s 139(9)-

5) Notice u/s 148-

6)Notice u/s 156-

7) Notice u/s 245-

In case if you have received an income tax notice and need a solution, call us on the below number