Tax Deducted at Source (TDS) is a fundamental mechanism for collecting taxes at the source of income generation. TDS on property purchases plays a crucial role, and non-compliance with TDS provisions can result in severe consequences and penalties for the parties involved. This article examines the implications and penalties for non-payment of TDS on property purchases, focusing on the relevant sections of the Income Tax Act, 1961. To understand more about such consequences, consult an experienced property lawyer who can guide you about property laws in West Bengal and Kolkata.

Consequences of Non-Payment of TDS on Property Purchases under Relevant Sections:

1. Section 194IA: According to Section 194IA of the Income Tax Act, if TDS is not deducted on the sale of immovable property, the buyer is liable to pay a penalty equal to the amount of TDS. Additionally, interest is levied on the TDS amount from the due date of deduction to the actual date of deduction.
2. Section 201: Section 201 deals with consequences for non-deduction or non-payment of TDS. If the buyer fails to deduct TDS on the property purchases, they may be deemed an assessee in default. The buyer becomes liable to pay the TDS amount along with interest and a penalty equal to the amount of TDS. If the tax hasn’t been deducted, the purchaser will incur a monthly interest of 1%; additionally, a late payment interest of 1.5% to the government will be applied from the scheduled payment date. If you want to avoid such late fees, consult a property lawyer during the sale/purchase of properties in West Bengal and Kolkata.
3. Section 271C: Under Section 271C, if a person fails to deduct TDS as required by law, they may be subject to a penalty of a sum equal to the amount of TDS. This penalty is in addition to the interest payable on the TDS amount on property purchases.
4. Section 276B: Section 276B of the Income Tax Act deals with the prosecution for non-payment of TDS. If a person wilfully fails to deduct or pay TDS on property purchases, they may be punishable with rigorous imprisonment for a term extending up to seven years. This section emphasizes the seriousness of non-compliance with TDS provisions and you need to consult an experienced property lawyer to avoid such penalties for non-payment of TDS on property purchases.
5. Section 40(a)(ia): Under Section 40(a)(ia), if TDS is not deducted or paid, the expenditure incurred on the property transaction may be disallowed while computing taxable income. This disallowance can significantly increase the tax liability of the defaulter.
6. Section 271H: The penalty for non-payment of TDS on property can go up to Rs. 1 lakh. This can be easily avoided by seeking help from an experienced property lawyer in Kolkata and West Bengal.
7. Section 234E: If there is a default due to non-filing or late filing of Form 26QB, a fee will be imposed under Section 234E of the Act. The late filing fee, as per Section 234E, is Rs. 200 per day, subject to the maximum tax amount owed. If you have failed to pay TDS on time, then a property lawyer can help with filing such late TDS.

Non-payment of TDS on property purchases can lead to various consequences and penalties as specified under relevant sections of the Income Tax Act, 1961. These include penalties equal to the amount of TDS, interest, disallowance of expenses, and even prosecution with imprisonment. All parties involved in property transactions must adhere to TDS provisions to avoid such adverse outcomes and ensure compliance with tax regulations. Seeking professional advice and understanding the relevant sections of the Income Tax Act can help mitigate risks associated with non-payment of TDS on property purchases.

For more help regarding TDS on property transactions, you may contact an experienced property lawyer here.