Can Sellers Claim a Refund for TDS under Form 16B in FY 2024-25 and FY 2025-26?

Sellers of immovable property who have had TDS deducted by the buyer can claim a refund for the excess amount deducted if their total tax liability is lower than the TDS amount. This process is governed under Section 194-IA of the Income Tax Act, 1961, and applies for financial years FY 2024-25 and FY 2025-26. To claim the refund, sellers must file their Income Tax Return (ITR) accurately, ensuring that the TDS credit is reflected in their Form 26AS.

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Table of Contents

• Can sellers claim a refund for TDS under Form 16B?

• Understanding Form 16B and TDS on Property Sale

• Can Sellers Claim a Refund for TDS?

• Important Points for Sellers Regarding TDS Refund

• Summary

• Conclusion

• FAQs

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Can sellers claim a refund for TDS under Form 16B?

Yes, sellers can claim a refund for TDS deducted under Form 16B if their total tax liability is lower than the TDS deducted. The TDS amount deducted by the buyer on the sale of immovable property is reflected in Form 26AS, and the seller can claim it as a credit while filing their Income Tax Return (ITR). If the TDS amount exceeds the seller's tax liability, they are eligible to receive the excess amount as a refund, provided the ITR is accurately filed, declaring the capital gains and the TDS credit.

Understanding Form 16B and TDS on Property Sale

Form 16B is a TDS (Tax Deducted at Source) certificate that is issued by the buyer of immovable property when TDS is deducted on the sale consideration. This TDS is applicable for property transactions exceeding ₹50 lakh (excluding agricultural land), as per Section 194-IA of the Income Tax Act, 1961. The buyer, acting as the deductor, is responsible for deducting 1% of the total sale amount at the time of payment or credit. This deduction is made on the sale consideration (the agreed price of the property), excluding agricultural land.

Once the TDS is deducted, the buyer deposits the amount with the government through Form 26QB. This form serves as both a return and a challan for the TDS deduction. After depositing the TDS, the buyer must issue Form 16B to the seller as a proof of TDS deduction. It is mandatory for the buyer to provide this certificate within 15 days from the date of depositing the TDS. This ensures that the seller has valid documentation to claim any credit for the TDS deducted while filing their Income Tax Return (ITR).

Can Sellers Claim a Refund for TDS?

Sellers who have had TDS deducted on the sale of property can claim a refund if their total tax liability is lower than the TDS deducted. To do so, the seller must declare the capital gains from the property sale in their ITR for the applicable financial year. The amount of TDS deducted is reflected in the seller’s Form 26AS, which is a consolidated tax statement showing all TDS transactions. The seller can claim the TDS as a credit against their total tax liability.

If the TDS deducted exceeds the seller's total tax liability, they are eligible to claim a refund of the excess amount. This refund claim is made when the seller files their ITR, declaring the capital gains and applying for the TDS credit as reflected in Form 26AS. The refund will be processed by the Income Tax Department, provided the ITR is filed accurately and all required details are correctly declared.

Important Points for Sellers Regarding TDS Refund

1. Receiving Form 16B: Sellers must ensure that they receive Form 16B from the buyer after TDS is deducted. This form serves as proof of TDS deduction and is essential for claiming the TDS credit.

   
   

2. TDS Credit in Form 26AS: After the buyer files Form 26QB and deposits the TDS, the TDS credit will appear in the seller's Form 26AS within 7-15 days. Sellers should verify this entry to ensure it is correctly reflected.

   
   

3. Filing the ITR: To claim a refund, sellers must file their ITR accurately, declaring the capital gains earned from the sale of property. In the ITR, the seller must claim the TDS credit from Form 16B and Form 26AS.

   
   

4. Eligibility for Refund: Sellers can claim a refund if the TDS amount exceeds their total tax liability. Refunds are processed after the ITR is filed, and if there is any excess TDS deducted, the seller will receive the refund in their bank account.

   
   

5. Late Issuance of Form 16B: If the buyer delays issuing Form 16B, penalties may apply to the buyer, but this will not affect the seller’s ability to claim the TDS credit or refund. The seller's right to claim a refund remains intact, as long as the correct forms are filed.

   
   

Summary

Aspect	Details
TDS Deduction Rate	1% on sale consideration above ₹50 lakh (excluding agricultural land)
Deductor	Buyer of the property
Certificate Issued	Form 16B, issued by the buyer to the seller within 15 days of TDS deposit
TDS Deposit Form	Form 26QB
Seller’s Action	File ITR declaring capital gains, claim TDS credit from Form 16B and Form 26AS
Refund Eligibility	If tax liability < TDS deducted, seller can claim refund via ITR
Relevant Law	Income Tax Act, 1961, Section 194-IA
Applicable FY	FY 2024-25 and FY 2025-26

Conclusion

In summary, sellers who have had TDS deducted under Form 16B can claim a refund if the total TDS exceeds their actual tax liability. The process requires sellers to accurately file their Income Tax Return (ITR), declaring their capital gains from the sale and claiming the TDS credit from Form 16B and Form 26AS. It's essential that sellers receive Form 16B from the buyer as proof of TDS deduction, and ensure that the TDS appears correctly in their Form 26AS. While penalties may apply for late issuance of Form 16B by the buyer, the seller's right to claim a refund remains unaffected. By following the correct procedure, sellers can recover any excess TDS deducted from the sale of property.

FAQs

1. What is Form 16B?

   Form 16B is a TDS certificate issued by the buyer of the property to the seller. This certificate is provided after deducting 1% TDS on the sale consideration of immovable property exceeding ₹50 lakh (excluding agricultural land). The buyer is required to issue this certificate as proof of the tax deduction made during the transaction. Form 16B is essential for the seller to claim the TDS credit when filing their Income Tax Return (ITR).

   
   

2. Who is responsible for issuing Form 16B?

   The buyer of the property is responsible for issuing Form 16B to the seller. Once the TDS is deducted, the buyer must issue Form 16B within 15 days from the date the TDS is deposited with the government through Form 26QB. This timely issuance ensures that the seller can claim the TDS credit while filing their ITR.

   
   

3. What is the TDS rate for property sales under Form 16B?

   The TDS rate under Form 16B is 1% of the sale consideration, applicable to transactions involving immovable property where the sale amount exceeds ₹50 lakh, excluding agricultural land. This TDS is deducted by the buyer and deposited with the government, and it is calculated based on the sale consideration of the property.

   
   

4. Can sellers claim TDS refund if the property is sold for less than ₹50 lakh?

   No, the TDS provisions under Section 194-IA of the Income Tax Act apply only to property transactions where the sale consideration exceeds ₹50 lakh. If the property sold is valued at less than ₹50 lakh, TDS is not applicable, and therefore, sellers cannot claim a refund for TDS.

   
   

5. How can sellers claim a TDS refund under Form 16B?

   To claim a refund, sellers must file their Income Tax Return (ITR) for the relevant financial year and declare the capital gains from the property sale. The TDS amount deducted by the buyer will be reflected in the seller’s Form 26AS. The seller can then claim the TDS credit against their total tax liability. If the TDS exceeds the seller's tax liability, a refund will be processed after the ITR is filed.

   
   

6. How long does it take for TDS credit to appear in Form 26AS?

   Once the buyer files Form 26QB and deposits the TDS, the TDS credit should appear in the seller’s Form 26AS typically within 7-15 days. This time frame may vary depending on the speed of processing by the Income Tax Department, but sellers should check Form 26AS regularly to ensure that the TDS credit is correctly reflected.

   
   

7. What happens if the buyer delays issuing Form 16B?

   If the buyer delays issuing Form 16B, they may be subject to penalties for non-compliance. However, this does not affect the seller’s right to claim the TDS refund. The seller can still file their ITR and claim the TDS credit, but they may need to follow up with the buyer to ensure that the certificate is issued. Late issuance of Form 16B does not negate the seller’s claim for the TDS refund.

   
   

8. Do sellers need to file their Income Tax Return to claim a refund?

   Yes, sellers must file their ITR to claim a refund for TDS under Form 16B. The ITR should include the declaration of capital gains from the property sale along with the TDS credit reflected in Form 26AS. The ITR filing is the mechanism through which the seller can initiate the TDS refund process.

   
   

9. Can sellers claim a TDS refund if their tax liability is lower than the TDS deducted?

   Yes, if the seller's tax liability is less than the TDS deducted, they are eligible to claim a refund for the excess TDS deducted. This excess amount can be refunded after filing the ITR, where the seller will declare the TDS credit and the reduced tax liability.

   
   

10. What if the TDS deducted is higher than the seller's tax liability?

    If the TDS deducted by the buyer is higher than the seller’s actual tax liability, the seller can claim a refund for the excess amount after filing their ITR. The Income Tax Department will process the refund once the ITR is filed, and the excess TDS will be credited to the seller’s bank account.

    
    

11. Are there any penalties for incorrectly filing Form 16B?

    While penalties can apply to the buyer for incorrectly or late filing Form 16B, it does not affect the seller’s ability to claim the TDS refund. The seller can proceed with the refund process as long as the ITR is filed correctly, and the TDS credit is reflected in Form 26AS. The penalty on the buyer does not impact the seller’s claim.

    
    

12. How does the TDS refund process work after filing the ITR?

    After the seller files the ITR and claims the TDS credit, the Income Tax Department processes the refund if the TDS exceeds the seller's tax liability. The refund is typically credited directly to the seller's bank account after the ITR is processed and the claim is approved. The entire process may take a few weeks, depending on the department’s processing time.