Income Tax Query 6: TDS credit to other person where Income is assessable in the hands of other person

Scenario: A couple is selling their Residential House. The said Residential House is held in their Joint Names. However, the whole of consideration for acquisition of the property was paid by the Husband.

In terms of Section 64(1)(iv), any Income from asset transferred to Spouse without consideration shall be added to the Income of transferee. Can TDS u/s 194IA in respect of Immoveable Property be deducted in the Hands of Husband only.

Response:

Sub-Rule (2) of Rule 37BA deals with Credit for tax deducted at source where Income is assessable in the hands of any other person by virtue of the provisions of the Income Tax Act, 1961.

(2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee :
Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).
(ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.
(iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody.

Accordingly, the Deductee (in this case the Wife / Spouse) shall File a Declaration with the Deductor in term of Sub-Rule (2) of Rule 37BA to request the deductor to deduct / credit the TDS to the other person. While No Form or Format of the Declaration has been provided in Law, Clause (ii) mandates that the declaration shall

1. name, address, permanent account number of the person to whom credit is to be given
2. payment or credit in relation to which credit is to be given
3. reasons for giving credit to such person.

Vide Clause (iii) the Deductor is required to issue TDS Certificate in the name of the other person to whom credit is to be given (that is to say File the Statement of Tax Deducted in, Forms 26Q, 26QB or 27A, as the case may be, in the name of the other person) and to issue Form 16A as downloaded.

The Deductor is also required to keep the said declaration in his safe custody. The intention of the same appears to be to ensure that the said Declaration shall be produced before the Assessing Officer (TDS) if required.