The fact that PAN (Permanent Account Number) cards are important is a no-brainer! However, did you know that PAN Cards are often vital in case of property transactions? Chances are, most of us would answer No to this question and it’s quite natural. After all, it is little yet crucial things like this which are often overlooked by people, only to crop up later on.
When is PAN necessary?
Here’s a brief look at some of the transactions in the property market, for which a PAN Card is necessary:
- Property purchases- Whenever immovable property is bought (with exception of agricultural land) and the value crosses Rs. 50 lakhs, assuming you are buying from an Indian resident, tax has to be deducted at 1% at the time of making payment to the builder/seller. For deposition of TDS (tax deducted at source), you will require your TAN (tax deduction account number). This requirement for deducting TDS is applicable for all taxpayers in the country and individual taxpayers are exempted from having this TAN. You should instead possess a valid PAN Card for depositing TDS and adhering to regulations. This applies even when you do not have any taxable income and do not have to file your returns. The seller should also provide a valid PAN Card. In case he/she cannot provide the same, you should deduct taxes at 20% instead of 1% as stated earlier.
- TDS credit in case of rental income- Any individual paying rentals for immovable properties (commercial/residential/land/industrial) has to deduct TDS at 10% from the rental amount in case the rent amount crosses Rs. 1.8 lakhs annually (Union Budget 2019-20 has proposed this at Rs. 2.4 lakhs annually). The landlord has to provide valid PAN or else the tenant can deduct taxes at 20% on the rent amount. To get TDS credit, the PAN has to be provided. In case the deductor does not get a valid PAN Card, there could be a penalty of Rs. 10,000 as well.
- Income receipt without TDS deduction- You can get rental income minus TDS deductions by providing Form 15G in case you are lower than 60 years of age or Form 15H in case you are a senior citizen. These will not be held valid in case you do not have a valid PAN Card mentioned. The income payer will then deduct taxes at 20% on the rent which is a higher amount. You can always apply to the TDS officer for issuing a certificate which helps you get rent minus TDS or a lower rate of TDS than 10% which has been prescribed. However, the valid PAN has to be mentioned for ensuring validity of this form.
- Purchase/sale documents for specific transactions- The PAN of the seller/buyer has to be quoted whenever there is any immovable property transaction and the value crosses Rs. 5 lakhs. The PAN numbers should be there on the documents covering the purchase/sale of immovable property.
- NRI buyers- NRIs should apply for a PAN Card if they wish to buy a property in India.
The basic take-away
The core take-away here is that both sellers and buyers should possess valid PAN Cards when it comes to buying/selling property or land. PAN is also necessary in case of rental income and also in case of NRI transactions. The above mentioned transactions should be carefully examined by you before venturing into any property transaction. As a result, your PAN Card should be applied for (if you haven’t already) and you should always emphasize on the same from the other party in your property transaction.
More than the legal aspect, PAN Cards are also regarded as vital proofs of identity and overall reliability and transparency. Failure to furnish the same can be a glaring miss in case of any transaction in this regard. It’s not just about PAN Cards; be aware of the TDS regulations which are inter-linked to the same in many cases. These will help you avoid future hassles post buying/selling/renting/leasing any property.