Did you Know the Importance of Form No. 16B from Trade & Industry Perspective ?

What is Form 16B?

Form 16B is a vital document in the Indian income tax system. It serves as a certificate that a deductor issue to the deductee as proof of tax deducted at source (TDS) on the sale of immovable property, such as land, house, or commercial property.

This certificate contains critical information, including the name and PAN of the deductor and deductee, the property’s address, the amount paid for the property, and the TDS deducted and deposited with the government.

Form 16B is essential for a deductee because it allows them to claim TDS credit while filing their income tax returns. Without this certificate, they might end up paying more taxes than they owe.

Suppose you have sold an immovable property for ₹1 crore, and the buyer has deducted TDS at the rate of 1% under the Income Tax Act, which amounts to ₹1 lakh. Now, the buyer will generate a Form 16B certificate in your name and issue it to you. It will contain details such as your name and PAN, the buyer’s name and PAN, the property’s address, the amount paid (₹1 crore), and the TDS deducted (₹1 lakh).

As a seller, you can use this Form 16B certificate to claim TDS credit while filing your income tax returns. For instance, let’s say your total tax liability for the year is ₹20 lakh, but the TDS deducted by the buyer is ₹1 lakh. In that case, you can claim a credit of ₹1 lakh in your income tax return and pay only the balance amount of ₹19 lakhs.

So, Form 16B serves as proof that the TDS has been deducted and deposited with the government and enables you to claim TDS credit, thereby reducing your tax liability.

Who issues Form 16B?

Form 16B is issued by the buyer of the immovable property or the person responsible for deducting TDS on behalf of the buyer. The buyer must deduct TDS at the rate of 1% and issue Form 16B to the seller.

When is Form 16B issued?

Form 16B must be issued within 15 days from the due date of furnishing the statement of tax deducted at source. The buyer can download Form 16B from the TRACES website after submitting the TDS statement in Form 26QB.

What information does Form 16B contain?

Form 16B is the go-to document for anyone looking to get a clear picture of their Tax Deducted at Source (TDS) on the sale of immovable property in India. This statement of TDS is a powerhouse of information that includes the following details:

• Name and address of the deductor (the buyer of the immovable property)
• PAN (Permanent Account Number) of the deductor
• Name and address of the deductee (the seller of the immovable property)
• PAN of the deductee
• Address of the property sold
• Amount paid for the property
• Amount of TDS deducted
• Date of TDS deduction
• Date of deposit of TDS with the government
• Assessment year for which TDS is deducted

Eligibility Criteria for Form 16B

For the buyer: The buyer of the immovable property must have a valid PAN issued by the Income Tax Department. The buyer must deduct TDS at the rate of 1% of the sale consideration amount. The buyer must deposit the TDS amount with the government within the specified due date.

For the seller: The seller of the immovable property must have a valid PAN issued by the Income Tax Department. The seller must have sold an immovable property for a consideration of more than ₹50 lakhs. The seller must have provided their PAN to the buyer.

Benefits of Form 16B

Here are some benefits of Form 16B:

1. Proof of TDS:Form 16B is proof of tax deducted at source (TDS) on the sale of a property. It serves as a document for the buyer to show that TDS has been deducted and deposited with the government.
2. Compliance with Tax Laws:As per the Income Tax Act, TDS must be deducted on the sale of immovable property. By issuing Form 16B, the deductor complies with the tax laws and avoids any penalty or legal action.
3. Easy Processing of Property Transactions:The buyer can efficiently process the property transaction by submitting Form 16B to the registrar’s office while registering the property. This helps in avoiding any delay or hassle in the registration process.
4. Helps in Filing Income Tax Returns:Form 16B provides all the necessary details required for the buyer to claim credit for the TDS deducted while filing their income tax returns.
5. Serves as a Valid Document:Form 16B is a valid document that contains all the necessary details of the TDS deducted and deposited. It can be used as proof of payment in case of any dispute or legal proceeding.

How to get Form 16B? 

To obtain Form 16B, the buyer of the immovable property must follow these steps:

• Visit the TRACES website and log in using your credentials
• Under the ‘Downloads’ tab, select ‘Form 16B’
• Enter the required details, such as the seller’s Assessment Year, Acknowledgment Number, and PAN
• Click on ‘Submit’ and verify the details
• Download the requested Form 16B in the ZIP file format
• Extract the ZIP file’s contents and share it with the seller of the property

It is essential to note that Form 16B can only be generated and downloaded from the TRACES portal by the buyer and not by the seller.

How to file ITR with Form 16B?

If you are a seller of the immovable property, you can use Form 16B to claim credit for the TDS amount deducted by the buyer while filing your income tax returns. Here are the steps to file ITR with Form 16B:

1. Gather all necessary documents:Before filing your ITR, you must gather all the relevant documents, such as Form 16B, bank statements, and other income-related documents.
2. Verify Form 26AS:Form 26AS is a tax credit statement that shows the amount of tax deducted on your behalf and deposited with the government by the buyer. Verify Form 26AS with Form 16B to ensure there are no discrepancies.
3. Determine the appropriate ITR form:The ITR form that you need to file depends on your income sources, such as salary income, capital gains, business income, or income from other sources.
4. Fill in the required details:Enter all the required details, such as income details, personal information, tax deductions, and other relevant details, in the ITR form.
5. Attach Form 16B:Attach Form 16B while filing your ITR to claim credit for the TDS amount already deducted by the buyer.
6. Verify the ITR:Before submitting your ITR, verify all the details entered and ensure no errors or discrepancies.
7. Submit the ITR:Once you have verified all the details, submit the ITR online on the Income Tax Department’s e-filing website or offline by mailing the physical copy to the designated ITR processing centre.

Filing your ITR with Form 16B can simplify the process and ensure that you claim credit for the TDS already deducted. It is essential to make sure that all the details are correctly entered and that there are no discrepancies to avoid penalties or legal complications.

Is it Mandatory to have Form 16B? 

Form 16B is a TDS certificate issued in property transactions, and it is not mandatory to have Form 16B to file ITR. However, to verify if the deductible tax is paid to the government, the buyer can view their Form 26AS online or obtain a Form 16B certificate from the seller.