The Permanent Account Number (PAN) is your financial identity these days. The Government of India has mandated the inclusion of PAN for many financial transactions. This enables the matching of an assessee’s income, borrowing, investments, and other business activities. It’s one of the ways in which the government looks to curb black money, fraudulent transactions, and increase its tax base.
PAN is even more important in the real estate world. Real estate transactions are high ticket dealings. It’s a space that has previously been known to avoid taxes and duties by conducting transactions in cash. But with RERA, the Indian real estate sector is moving into a different league. To bring in transparency in the sector, there are many transactions now that can be completed only with a PAN card.
Purchase or sale of immovable property above Rs 10 lakh
Any purchase and sale of immovable property over Rs 10 lakh require PAN of both the seller and buyer for registering the property. The law mandates that the Registrar mention PAN of both the parties in the document. Did you know the Registrar can refuse to register your transaction if you do not furnish your PAN?
Earlier, the limit was set at Rs 5 lakh.
Tax deduction at source on rental income exceeding Rs 50,000/-
Many people earn huge amounts in rent, and these remain unaccounted or partially accounted. Salaried personnel often claim higher House Rent Allowance without proper receipts.
To restrain such transactions, the Finance Bill 2017 introduced a provision of deducting 5% as TDS by the tenant for rent over Rs 50,000.
The tenant has to deposit the amount so deducted with the government. Usually, a Tax Deduction and Collection Account (TAN) is necessary to deposit TDS. In this case, the need for TAN is waived off. The tenant and the landlord can use their PAN for depositing the amount deducted as TDS. The landlord can claim credit for the amount deducted while filing his/her return.
The deduction rises to 20% if the landlord fails to provide his PAN number. This is a double whammy on the landlord when he fails to furnish his PAN. The TDS is at a higher rate, and he can’t claim credit. So it pays to furnish your PAN.
This rule applies for rentals on all kinds of immovable property.
Tax deduction in case of purchase of immovable property over Rs 50 lakh
When a person who is a resident of India purchases an immovable property exceeding Rs 50 lakh, the buyer has to deduct 1% TDS. While deducting and depositing TDS quoting of PAN is mandatory.
TDS thus deducted is matched with the records received from Registrar for property transactions. If the payment has been made in instalments to the seller/ builder, then TDS deduction has to be made and deposited in instalments. There have been instances when buyers have received notices from the Income Tax Dept for not deducting this 1%.
There you have it. The PAN card has become a vital part of real estate transaction. When it comes to the law, it is always safer to stay on the right side.
