Introduction
The Income Tax Department of India has recently introduced Form 128, a new compliance requirement aimed at improving transparency in tax reporting. This form specifically targets transactions where the Tax Deducted at Source (TDS) is zero or lower than the standard rate, including property transactions, contractor payments, and other financial dealings.
The introduction of Form 128 is part of the government’s broader initiative to enhance tax compliance and reduce evasion.
What Is Form 128?
Form 128 is a declaration form that must be submitted by individuals or entities in cases where:
- TDS payable is zero
- TDS is lower than the applicable rate
The form requires taxpayers to disclose details of the transaction, parties involved, and the reason for non-deduction or lower deduction of TDS.
Key features include:
- Mandatory for property transactions, professional payments, rent, and other specified payments.
- Helps the Income Tax Department track transactions that could otherwise be underreported.
- Applicable for both residents and non-residents engaged in financial transactions in India.
Why Form 128 Has Been Introduced
The government introduced Form 128 to:
Ensure Transparency: Track payments where TDS is not fully deducted.
Prevent Tax Evasion: Identify potential cases where individuals or entities might underreport income.
Streamline Compliance: Make it easier for the Income Tax Department to reconcile TDS reports with actual transactions.
Reduce Litigation: Clarify reporting requirements and reduce disputes over zero or lower TDS cases.
Transactions Requiring Form 128
Form 128 must be submitted for transactions including, but not limited to:
- Property Transactions: Sale or purchase of immovable property where TDS is not deducted.
- Contractor Payments: services rendered where TDS deduction is lower than the statutory rate.
- Professional Fees: Payments to professionals with minimal or nil TDS.
- Rent Payments: Instances where TDS on rent is zero or below the required rate.
- Other Specified Transactions: As notified by the Income Tax Department in relevant circulars.
How to File Form 128
- Form 128 is submitted electronically through the Income Tax Department’s portal.
- Taxpayers must provide:
- PAN details of both parties
- Transaction date and amount
- Reason for zero or lower TDS
- Any supporting documents, if applicable
- The form is usually submitted along with annual TDS returns, ensuring reconciliation with Form 26AS and other TDS statements.
Implications for Taxpayers
1. Increased Compliance Burden
Taxpayers must maintain accurate records of transactions, especially those with zero or lower TDS, to avoid penalties.
2. Transparency in Property Deals
Property buyers and sellers now need to report TDS-related information even if no tax was deducted, ensuring proper scrutiny of real estate transactions.
3. Penalties for Non-Compliance
Failure to submit Form 128 or submitting incorrect information may lead to:
- Monetary penalties under the Income Tax Act
- Notice for discrepancies during assessment
- Possible interest on underpaid TDS
Benefits of Form 128
Despite adding compliance responsibilities, Form 128 offers benefits:
- Reduces disputes with the Income Tax Department
- Clarifies zero or lower TDS cases for both payer and payee
- Strengthens the tax system by ensuring all transactions are traceable
Conclusion
The introduction of Form 128 marks a significant step toward enhancing tax transparency and accountability in India. It specifically targets transactions where TDS is zero or lower than the statutory rate, including property dealings, professional fees, rent, and contractor payments.
Taxpayers must familiarize themselves with this new requirement to avoid penalties and ensure smooth compliance. By reporting accurately, individuals and businesses can contribute to a more transparent and accountable taxation system.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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