Is PAN Must For Property Sale, Purchase And Renting?

In India, almost all financial and non-financial transactions require the consumer to submit their PAN (permanent account number) card. It is only natural then that real-estate transactions, which are highly capital intensive, require the parties concerned to cite their PAN while carrying out the deal. In this article, we would talk about the consequences if you do not have a PAN, a unique 10 digit alpha-numeric identity that is provided to taxpayers in the country.

Sale and purchase of property

In transactions exceeding Rs 5 lakh: If you are buying a plot or a flat where the deal value exceeds Rs 5 lakh, the sub-registrar would ask the buyer as well as the seller to submit their respective PAN cards at the time of registration. These details must also be mentioned in the sale deed. If PAN card numbers of the transacting parties are not mentioned in the document, the sub-registrar may refuse to register the documents. There is, however, a provision under which people who do not have a PAN card can submit Form 60 along with their address proof to get the sale deed registered.

In transactions exceeding Rs 50 lakh: In such cases also, both the buyer and the seller must submit their PAN cards to carry out the transaction.

The law makes it mandatory for the buyer to deduct one per cent of the property value as TDS (tax deducted at source) if the deal value if over Rs 50 lakh. This means if the deal value is Rs 51 lakh, the buyer would deduct Rs 51,000 from this amount before making the payment to the developer of the seller. This money then has to be duly submitted with the income tax department. While a TAN (tax deduction account number) is required to do the filing, individual taxpayers can complete the task through their PAN card only. Even if the buyer is not a taxpayer, they will have to get a PAN card made to deduct TDS.

While submitting the TDS, the buyer will also have to mention the PAN number of the seller. Do note here that in case the seller does not have a PAN, the buyers will have to deduct 20 per cent of the deal value as TDS in place of one per cent.

Also read: All About TDS That Buyers, NRIs And Renters Need To Know About

Renting of property

If annual rent exceeds Rs 2.40 lakh: Section 194I of the I-T Act makes it incumbent upon tenants to deduct the tax at source. Earlier, if a landlord earned over Rs 1.80 lakh in rent annually, their tenants were required to deduct TDS at 10 per cent under the provisions of the law and duly submit it with the I-T department. In the Budget 2019-2020, this limit was increased to Rs 2.40 lakh.

In case the landlord has no PAN card, the tenant is under obligation to submit 20 per cent of the annual rent after deducting it at source. Interestingly, the landlord would get no credit for this payment in the absence of a PAN card. The landlord might also be asked to pay a penalty of Rs 10,000 for his failure to provide his PAN card to the tenant for the purpose of tax deduction.

In specific cases, landlords can ask the tax officer to issue them a certificate, which states that there TDS liability is lower. These certificates would only be valid if they are accompanied by PAN card details.

Also read: All You Need To Know About Rent Receipts

In case of tax-free rental income: After the upper limit was hiked in Budget 2019, those landlords who are earning an annual rental income below Rs 2.40 lakh will not be liable to pay any TDS. However, they have to furnish Forms 15G (people below 60 years of age) or Form 15H (people above 60 years of age) to enjoy the freedom from paying tax. In both the forms, the landlord is legally obliged to provide his PAN card details. In case the landlord does not have a PAN card, the forms would become illegal, making the tenant liable to deduct 20 per cent for the annual rent as tax. Certificates issued by the tax officer stating that a landlord get full exemption of TDS must also be accompanied by PAN card details to be valid.

Also read: FM Goyal Goes All Out To Please Taxpayers, Help Property Owners, Developers

Do NRIs need PAN card to buy/sell/rent property in India?

For buying: While the law does not makes it mandatory for a non-resident Indian (NRI) to have a PAN card if they do not earn taxable income from the home country, it is advisable to get a PAN card made so that the property registration process is easy.

For selling: Since property sale in the country means earning capital gains i.e. earning income, the NRI seller will have to provide his PAN card to complete the transaction.

For renting: NRI landlords who are earning taxable rental income in India will have to provide their tenant their PAN card for the purpose of tax deduction. The tax rate for NRI landlords is 30.9 per cent of the annual rent. 

Also read: Everything A Homebuyer Needs To Know About TDS