Income Tax Appellate Tribunal (ITAT), Delhi, in a ruling, said that when a seller sells a property and reports Long Term Capital Gain (LTCG) by reporting the entire sale amount in Assessment Year (AY) 2022-23 and claims TDS in the year of sale itself, he should get credit of TDS. This will be considered true even if the buyer has mistakenly deposited this TDS in the wrong year.

This decision was given while hearing a case. In this, an NRI had sold some of his property in AY 2022-23. However, the buyer paid TDS in AY 2023-24, due to which the Income Tax Department refused to give TDS credit to the seller. 20 percent TDS was deducted from the seller, which amounted to approximately Rs 20.99 lakh.

What is Form 71?

Under Form 71, the Income Tax Department helps the seller to get its refund by rectifying the mistake of delay in depositing TDS by the buyer. If TDS has been deposited in the wrong financial year, then with the help of this form it is transferred to Form 26AS of the correct year and the TDS amount is credited. If you want, you can file Form 71 by visiting the official website of the Income Tax Department.

What is the matter?

The person selling the property sold a property for Rs 94.06 lakh in September 2021. The buyer deducted TDS of Rs 20,99,240, but deposited it in the wrong assessment year 2023-24. Whereas when the seller filed his Income Tax Return (ITR) for Assessment Year (AY) 2022-23 on July 27, 2022, he showed taxable income of Rs 4.86 lakh.

Out of this income of Rs 4.86 lakh, Rs 4.64 lakh was income from house property. Whereas the income from other sources was Rs 32,115. He also claimed long term capital loss of Rs 5.55 lakh and TDS credit of Rs 21.6 lakh. This means that if he had got TDS credit, he would have got a tax refund.

Without TDS credit his tax payable was Rs 12,301. While processing his income tax return, the Centralized Processing Center of the Income Tax Department allowed TDS credit of Rs 60,872 against his claim of Rs 21.6 lakh. The CPC did not allow TDS credit of Rs 20.99 lakh which was deducted and deposited by the buyer on the sale of the property.

What did the court say?

The seller filed an appeal before the CIT (A), which was dismissed. Subsequently, he filed an appeal in ITAT Delhi. On November 12, 2025, the court ruled in his favor and said that capital gains are taxable in the same year in which the property transaction takes place. In such a situation, the Income Tax Department should follow the Matching Principle and credit them the TDS of that year.

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