IT department focus on TDS in context with NRIs real estate deals

The Income Tax department will now keep an eye on tax deducted at source (TDS), especially in context with the sale of property by non-residents and other international transactions.

Surveys will also be conducted to detect the non-compliance with obligations regarding withholding tax. This move is critised by some tax practitioners as it could result in harassment, for smaller tax payers. Last financial year, the IT department had issued number of prosecution notices, that also covered cases for short deduction or delayed remittance of TDS even by smaller business entities.

In its action plan for the current year that is ending on 31st March, 2019, The Central Board of direct taxes(CBDT) figured out that in many cases, when a real estate property is purchased by the non residents, the buyer of the property only deduct 1% TDS instead of 20%. These cases should be dealt in on priority basis as they are “high risk” cases.
As TDS is an important element of total direct tax collections, CBDT’s action plan asks for applying more focused and effective risk parameters in selecting high-risk data for verification, which should then be processed and acted upon on a real-time basis.
IT officials are also asked to generate a list of defaulters by collecting data of sale of immovable property that is available in Annual information returns (AIRs) filed by the property registrars and matching it with the transactions on which TDS has been deducted. IT officials are also asked to identify those TDS statements that are filed by the top 100 deductors in the previous financial year and monitor the deductions in the current year and verify any case of lower TDS.
Surveys are the most effective tool for detection of non-compliance with withholding tax requirements. According to the action plan report, Each IT officer in charge of TDS is accordingly required to carry out at least 10 surveys during the year. Other IT officers are required to conduct at least two surveys during the year.
An IT official explains, big-ticket property deals and M&A transactions are some cases that are highlighted in newspaper reports, all of which have TDS implications, will be picked up for such surveys