Refund of TDS Deducted and Deposited on Property Transactions
Sometimes, buyers mistakenly deduct and deposit more TDS than required when purchasing a property. This could happen due to calculation errors, multiple payments, or misinterpretation of tax rules. In such cases, the Income Tax Department allows the buyer to claim a refund for the excess TDS deducted and deposited. However, getting a refund is not an automatic process, it requires proper filing and following the prescribed procedure.
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When can a TDS Refund Be Claimed?
A refund for excess TDS deducted on a property can be claimed in the following situations:
• Mistaken Overpayment: If the buyer deducted more than 1% TDS by error.
• Cancellation of Property Deal: If the transaction is cancelled after TDS has already been deducted and deposited.
• Double Payment: If the buyer deposits TDS twice for the same payment.
• Incorrect Property Value Consideration: If TDS was deducted based on a higher purchase price than what was actually paid.
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How to Claim a TDS Refund?
Step 1: Check Form 26AS for TDS Details (https://www.incometax.gov.in/iec/foportal/)
Before applying for a refund, the buyer should check Form 26AS (available on the Income Tax e-filing portal) to ensure that the excess TDS amount is reflected in their tax records.
Step 2: File an Online Refund Request
The buyer (not the seller) must initiate the refund request through the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal. The process is as follows:
1. Log in to the TRACES portal (https://www.tdscpc.gov.in).
2. Go to ‘Refund Request’ under the Statements / Payments section.
3. Enter the Assessment Year (AY) and Challan details of the excess TDS paid.
4. Submit the refund request with supporting documents.
Step 3: Submit Supporting Documents
The buyer may need to provide documents such as:
• Proof of property transaction cancellation (if applicable).
• Sale agreement and payment receipts.
• PAN details of both buyer and seller.
• Form 26QB acknowledgment number.
Step 4: Income Tax Department Processing
Once submitted, the refund request is reviewed by the Assessing Officer (AO). If the documents are correct and verified, the refund is processed, and the excess amount is credited to the buyer’s bank account.
3. How Long Does the Refund Process Take?
The refund process typically takes 3 to 6 months, depending on the correctness of the documents and the verification process by the tax authorities. The buyer can track the refund status on the TRACES portal or the Income Tax e-filing website.
Example of Excess TDS Refund Claim
Example 1: Overpayment of TDS
Rahul buys an apartment worth ₹80 lakh. Instead of deducting 1% TDS (₹80,000), he mistakenly deducts ₹1,60,000 (2%) due to a calculation error. He deposits this excess amount with the Income Tax Department. After realizing the mistake, Rahul applies for a refund of ₹80,000 by submitting a request through TRACES. After verification, the refund is approved, and the excess amount is credited back to his account.
Example 2: Cancellation of Property Deal
Priya booked a property for ₹1 crore and deducted ₹1 lakh TDS before making the payment. However, due to legal issues, the deal was cancelled. Since the seller did not receive the payment, Priya was eligible for a full refund of the TDS amount. She filed a refund request along with the cancellation agreement, and after verification, the ₹1 lakh was refunded to her account.
Claiming a TDS refund requires patience and proper documentation, but following the correct procedure ensures that buyers recover their excess payments without financial loss.