Consequences of non deduction of TDS on Purchase of Property

The non-deduction of TDS on the purchase of property can lead to various consequences for both the buyer and the seller. Here are some potential repercussions:

  1. Penalties and Interest: The Income Tax Act mandates TDS (Tax Deducted at Source) deduction on certain transactions, including the purchase of property. If TDS is not deducted as required, the buyer may be liable to pay a penalty under Section 201 of the Income Tax Act, along with interest on the amount of tax that should have been deducted. The penalty could be up to the amount of tax that should have been deducted.
  2. Legal Consequences: Non-compliance with TDS provisions could result in legal actions or notices from the Income Tax Department. The department may issue notices demanding payment of the due tax along with penalties and interest.
  3. Disallowance of Expenses: If TDS is not deducted as required, the Income Tax Department may disallow the expenses claimed by the buyer related to the purchase of the property. This means that the buyer won’t be able to claim the deduction for the amount not deducted as TDS.
  4. Non-availability of Tax Credit: The seller may face difficulties in claiming tax credit for the TDS that should have been deducted but wasn’t. This could lead to disputes between the buyer and the seller regarding tax liabilities.
  5. Scrutiny and Audits: Non-compliance with TDS provisions could lead to scrutiny or audits by the Income Tax Department, causing inconvenience and additional compliance burdens for both parties involved.
  6. Risk of Prosecution: In severe cases of non-compliance or deliberate evasion, there could be a risk of prosecution under the Income Tax Act, which may involve penalties, fines, and even imprisonment.

It’s important for both buyers and sellers to ensure compliance with TDS provisions and other tax regulations to avoid such consequences. Proper documentation and adherence to tax laws can help mitigate the risks associated with non-deduction of TDS on property purchase. Consulting with tax professionals or experts can provide guidance on ensuring compliance with tax regulations. We at ebex consulting also provide consulting with regard to TDS on Purchase of Property.




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