Property buyer deposited TDS in wrong year? Do this

Who needs to file Form 71?

When you are selling a property , the buyer needs to deduct TDS at a specified rate from the sale price and deposit this TDS with the Income Tax Department against your PAN. In the past, many buyers accidentally deposited this TDS against incorrect PAN, incorrect financial year, etc. To assist property sellers to avoid these complications, the central board of direct taxes on August 30, 2023 notified a new form called Form 71 Form 71 is used to ensure that the TDS credit aligns with the assessment year in which the income has actually been assessed. You need to submit the application for Form 71 within two years from the end of the financial year in which the TDS was deducted.Recently there was a case in ITAT Delhi where the taxpayer despite filing the Form 71 was denied TDS credit because the property buyer had mistakenly deposited the TDS in the wrong year.The Income Tax Appellate Tribunal (ITAT) Delhi ruled that when the seller had sold the property and declared long term capital gain (LTCG) by declaring the full value of consideration in AY 2022-23 and claimed the TDS in the year of sale, he should get the TDS credit, irrespective of the fact that the property buyer made a mistake in depositing the TDS in the wrong year.Chartered Accountant Suresh Surana says that Form 71 need to be filed by a taxpayer who has already offered an item of income to tax in a particular assessment year, but the corresponding TDS has been deposited by the deductor in a later year and therefore does not appear in Form 26AS or AIS of the correct year. The Form is filed to match the TDS credit with the assessment year in which the income has actually been assessed.In this case in ITAT Delhi, Surana says the assessee declared long-term capital gains in AY 2022-23, but the buyer deposited the TDS only in AY 2023-24. As a result, the credit appeared in Form 26AS of the wrong year. To correct this timing mismatch and ensure that the TDS credit is granted in the year in which the income is chargeable to tax, the assessee was required to file Form 71 under section 155(20) of the IT Act.According to Surana, once Form 71 is filed within the prescribed time limit (two years from the end of the financial year in which TDS is reflected), the Assessing Officer is obligated to amend the intimation and grant the TDS credit in the correct assessment year, notwithstanding the delayed deposit by the deductor.Surana says: “The ITAT Delhi reaffirmed this mechanism and directed the Assessing Officer to apply the matching principle and allow the credit in AY 2022-23 based on Form 71 submitted by the assessee.”