Every person who has income chargeable to tax is required to file an income tax return to report their income and tax liabilities. However, income tax laws in India provide for collection/deduction of tax at source (TDS/TCS) itself. This, on the one hand, ensures, continuous revenue flow to Government and on the other hand, keeps checking on tax evasion. It is the responsibility of the payer to deduct tax (TDS/TCS) and pay it to the credit of Government.
For such tax deduction, obtaining a Tax deduction Account Number (TAN) is mandatory. Deductor also has the responsibility of filing Tax deduction at source (TDS) return providing particulars of deductees, nature of the payment made, tax deducted, rate at which it is deducted etc for every quarter of a financial year. The TDS returns filed facilitate the income tax department give credit of TDS to the right deductees. In addition to filing such returns, the deductor must also provide a TDS certificate to the deductee for such tax deducted.
Form 16B is one of the TDS certificates to be issued by the deductor under Income-tax Act, 1961 to the deductee in respect of TDS deposited to Government. In this article, we have discussed provisions relating to Form 16B and discussion is under following major heads:
1. Nature of tax deduction and person responsible to deduct tax
Provisions of this section are:
- There is a transfer (other than cases of compulsory acquisition) of immovable property
- Immovable property means land/building/part of building but excluding agricultural land*
- Buyer is responsible for paying consideration to resident seller in respect of such transfer
- Transfer is for a consideration of Rs 50 lakhs or more
- Buyer must deduct tax at the rate of 1% of consideration either at the time of credit or payment
- If seller does not provide for PAN, TDS at the rate of 20% as per Section 206AA
2. Form 26QB and Form 16B
Form 26QB is a return cum challan for payment of TDS to the Government which shall be furnished electronically for tax deducted under Section 194-IA.
Due date: Form 26QB shall be furnished within 30 days from the end of the month in which deduction is made. For eg: if payment/credit is made on 16th April, Form 26QB shall be furnished by 30th May.
Installments: In case of payment/credit in installments, as TDS is required for each installment, Form 26QB shall also be furnished for each such deduction.
Multiple parties to transaction: Form 26QB shall be furnished for each buyer and seller combination.
Example 1: If there one buyer, B1 and 2 sellers, S1 and S2, Form 26QB shall be furnished separately for B1 and S1 combination and B1 and S2 combination, hence overall 2 26QB to be filed.
Example 2: In example 1 above, if the second buyer, B2 is also added, Form 26QB shall be furnished separately for B1 and S1 combination, B1 and S2 combination, B2 and S1 combination and B2 and S2 combination, hence overall 4 26QB to be filed.
3. What if the payer does not possess TAN?
As mentioned above, obtaining TAN is mandatory for all deductors to be able to deduct TDS and pay it to the Government. It is also necessary to quote TAN in all communication with the Income-tax (TDS) department.
TDS is required to be paid by using Challan No. – ITNS 281. However, in case of transfer of immovable property transactions, individuals may be parties to the transaction in most cases and they are unable to use Challan No. ITNS 281 without TAN and obtaining TAN for one-off transaction is not feasible. Hence, deductors under Section 194-IA has been provided with an exception and they can file TDS return without TAN and a separate Return cum Challan Form 26QB has been provided to facilitate deductors without TAN to file TDS return for the purpose of Section 194-IA. Read our detailed guide on filling and filing of Form 26QB here.
Form 26AS – It takes 7 days from TDS payment, for the tax credit to have appeared in Form 26AS of seller.
4. Due date for issuance of Form 16B
Deductor shall issue Form 16B to the payee within 15 days from the due date for furnishing Form 26QB and Form 16B can be generated and downloaded from TRACES – TDS Reconciliation and Analysis and Correction Enabling System. For eg: Using the same example as above w.r.t due date for Form 26QB, Form 16B shall be issued on 14th June.
5. Procedure to generate and download Form16B from TRACES
Below is the Screenshot of Form No. 16B.
- Click here to register as taxpayer on TRACES with details of PAN and either detail of tax deducted or details of challan or details of Form 26QB. Also, enter the verification code and click on ‘Proceed’. Activation link will be sent to email id through which account can be successfully created
- If already registered login to TRACES here with username as ‘PAN’ and password
- Under downloads tab Select ‘Form 16B (For Buyer)’
- Furnish details such as assessment year, acknowledgment no. of the Form 26QB and PAN of the seller
- Form 16B will now be available on requested downloads section under Downloads category
- Form 16B can now be printed/saved