A PAN or Permanent account number is a code which acts as an identification for individuals, families, and corporates (Indian and Foreign as well), especially those who pay Income Tax in India. This unique 10 digit alphanumeric number acts as the primary key for storage of information of any individual for the entire lifetime.
Although with the change in the financial scenario, Union Government has made Adhaar mandatory for all the transactions, still PAN card has its own role play especially in case of property transactions. For example, in case of buying or selling a land, house, immovable property or flat and various property registrations, PAN Card is one of the most important documents required for the validation of the process.
So, to control any fraudulence as well widen the tax base, the Indian government has made it compulsory to quote PAN Card if an individual wants to proceed with the following kind of property transactions in India. Take a look:
During Property Purchase
When an individual or property buyer buys an immovable property excluding an agricultural land and if the value of the property exceeds Rs 50 lacs then as per the IT laws of India, the buyer has to deduct the tax at the rate of 1 percent at the time of payment to the seller or the builder.
However, in order to deposit Tax Deduction at source (TAS), then a person must have a tax deduction account number (TAN). On the other hand, it is important to deduct tax on all the immovable properties, while the law exempts individual taxpayers from TAN.
Moreover, to file your TDS a PAN account is a must. This is applicable to the cases where the individual does not have a taxable income and are not required to file the Income tax return.
Also, if the seller fails to produce his PAN card, then he/she is required to deduct tax at the rate of 20 percent instead of 1 percent.
Receiving credit for TDS for the rental income earned
According to section 194-1 of the Income Tax Act, the existing provisions says that, it is the duty of the rent payer to deduct tax at the rate of 10% of the rent on any land or building, if the aggregate of the rent paid or likely to be paid exceeds Rs 1.80 lakhs in a year.
However, if the landlord fails to produce his PAN, then the tenant is liable to deduct TDS at the rate of 20 percent on rent. The failure will also affect the landlord by not giving him credit for TDS. Also, the defaulter has to pay Rs 10,000 as fine.
Getting income without deduction of tax at source
If you are under the age of 60, then as per the tax laws, you can enjoy rental income, without tax deduction at source by filling up form number 15 G. On the other hand if you are a senior citizen, then to enjoy rental income the person has to fill up form number 15 H.
However, while filling up the form, one is required to enter his/ her PAN card details. Failing to do so, the payer of income shall deduct tax at a higher rate of 20% on the rent.
Also, one can make an application to TDS officer, for issuing a certificate that entitles to receive the rent without TDS or TDS at a lower rate than the prescribed 10%. However, if you do not mention correct PAN, then this form shall also be treated as invalid.
Sale and purchase documents
Finally, it’s important to keep in mind that if the value of the property exceeds Rs 5 lacs, then the PAN must be produced during the property documentation. In case, a person does not have a PAN then the registrar has to make sure that the person must produce ration card, driving license, passport etc.