Property-Related Transactions Where PAN Is Needed
Permanent Account Number (PAN) is a 10-digit alphanumeric number allotted by the Income Tax (I-T) Department to a person, and through this number, the departments track the financial transactions carried out by that person. This is why it is mandatory to submit your PAN Card details to carry out most transactions these days. However, only 42 crore people have a PAN card in India so far, data available with the Central Board of Direct Taxes show. Since property transactions involve exchange of large sums between the contracting parties, people involved in such transactions must have PAN cards. In this article, we will talk about what happens if you have yet to get your PAN card made.
All property buyers must have a PAN, even if the law does not make it mandatory for them to have one, for the simple reason that it would make the process much easier. Let us first examine, in which instances having a PAN is a must for property buyers.
Plot purchase: If the value of the plot exceeds Rs 5 lakh the buyer will have to submit his PAN for the registration purpose. In case the buyer is not a taxpayer and hence does not have a PAN, he may still request the sub-registrar to register the property by filing Form 60, along with your address proof.
Home purchase: If the value of the deal is over Rs 50 lakh, the buyer will have to submit his PAN. In this case, the buyer will have to use his PAN to deduct and submit one per cent of the transaction value as TDS (tax deducted at source), something the law mandates him to do. Without the PAN, the buyer would not be able to do that
NRI buyer: Non-resident Indians, whose income is not taxed in India, need not have a PAN. However, they must apply for a PAN if they are going to purchase a property. Depending on the use of this property, the buyer will have to file income tax or apply for the exemption.
Plot sale: If the value of the plot exceeds Rs 5 lakh, the seller will have to submit his PAN for the property to get registered. Again, if the seller is not a taxpayer and hence does not have a PAN, he may still request the sub-registrar to register the property by filing Form 60, along with their address proof.
Home sale: The seller must have a PAN to avoid taking several monetary hits, apart from the procedural hurdles.
The buyer will have to provide the seller’s PAN details to deduct, submit and issue a TDS certificate to the latter. In case the seller does not have a PAN, the buyer is liable to deduct 20 per cent of the deal value as TDS, in place of one per cent.
Also, property sellers have to pay long-term capital gains tax or short-term capital gains tax to the government on the profit they earn through the transactions. However, certain exemptions are allowed to the sellers if they use the sale proceeds to buy another property. To claim these benefits, however, the seller must have a PAN.
NRI seller: If the seller is an NRI, the buyer has to deduct over 20 per cent of the transaction value as TDS, depending on the deal value. This is basically an amalgamation of capital gains and TDS both. In case the seller is making short-term capital gains (if the property is sold within two years of purchasing it), the rate of tax would be 30 per cent. Since TDS and capital gains tax would come into play, the NRI seller must have a PAN to complete the formalities and claim exemption.
If a landlord earns over Rs 2.40 lakh annual as rent, the tenant is liable to deduct 10 per cent of the annual amount as TDS. For this, the landlord will have to provide his PAN details. In case the landlord does not have a PAN, TDS deduction would double to reach 20 per cent. The landlord would also not get any credit for this payment. Apart from that, the landlord may have to pay a penalty of Rs 10,000 for not having a PAN.
In many cases, landlords get the tax officer to issue them a certificate stating of negligible or lower TDS liability. This certificate works only if the landlord has a PAN.
Also, landlords who get full exemption from paying taxes because they earn less than Rs 2.40 lakh as annual rent will have to give their PAN details to claim the exemption.
NRI landlords: NRI landlords will have to file taxes if they are earning rental income in India. For this purpose, they will have to provide their PAN details to the tenant. To claim exemption on the rental income, too, they will have to submit PAN details.
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To deduct and submit the TDS on rent, the tenant needs to have a PAN, too.
Tenants with NRI landlords: Tenants with NRI landlords have to deduct 30.9 per cent of the annual value as TDS. To submit this amount with the government, the tenant would need a PAN as well as a TAN (Tax Deduction and Collection Account Number).