TDS on rent payment, property sale: Budget hikes penalty on delay in TDS certificate to Rs 500/day

Budget 2022 has proposed to hike the penalty for delay in issuance of TDS certificates by deductors including individual deductors. The Budget has proposed to hike the penalty to Rs 500 per day from Rs 100 per day currently. Mostly, employers and financial institutions such as banks etc are required to deduct TDS on salaries/payments made to individuals. However, in several cases individuals too are required, by law, to deduct TDS on payments. Every deductor of TDS is required to issue a TDS certificate to the deductee (person from whose income TDS has been cut). Delay in issue of this certificate beyond specified date attracts penalty.

An individual (except anyone subject to tax audit) is required to deduct TDS in the following conditions:

  • If monthly rent on house exceeds Rs 50,000
  • Buying an immovable property whose sale consideration exceeds Rs 50 lakh
  • Payments made to contractors or professionals if the total payable amount exceeds Rs 50 lakh in a financial year.

A buyer of immovable property is required to deduct tax at the rate of 1% of the sale value and furnish the challan-cum-statement in Form No. 26QB to deposit the TDS amount with the government. From the due date of depositing the TDS amount, he/she is required to issue TDS certificate i.e., Form 16B within 15 days. If the TDS certificate is not issued within 15 days, then he/she will be liable to pay a penalty of Rs 500 per day from FY 2022-23 onwards, as per the proposals.
Similarly, an individual living in a rented house and paying a monthly rent of Rs 50,000 or more will be required to deduct tax once during the financial year. He/she is liable to issue TDS Certificate (Form 16C) to the landlord within 15 days from the due date of depositing the TDS amount using challan-cum-statement (Form 26QC). If the TDS certificate is not issued within this due date, then the tenant will be liable to pay a penalty of Rs 500 per day from April 1, 2022.

The Budget memorandum states: Section 272A ensures compliance with various obligations under the Income-tax Act by penalising non-compliance and acting as a deterrent. However, the penalty of one hundred rupees had been commented upon by the CAG in their report on the entertainment sector as being too low. The penalty had not been increased since the section was introduced in 1999 and does not have an adequate deterrence value. Therefore, it is proposed to increase the amount of penalty for failures listed under sub-section (2) of section 272A to five hundred rupees from the existing sum of one hundred rupees.

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