The Permanent Account Number (PAN) Card bears a special significance in all types of instructions including non-financial and financial, in the country. Real Estate transactions are no different in this context. The parties involved in such transactions are required to produce their PAN during the deal. Let’s discuss why or not do you badly need a PAN for purchasing a home.
For Property Transaction above 5 Lakhs
If the flat or home you have selected costs you above 5 lakhs then both the buyer and the seller would be asked to submit each of their PAN Cards during registration. The sale deed too must bear the PAN details or else the documents won’t get registered. Only if you don’t own a PAN Card, you will have to submit Form 60 and address proof for the registration of the sale deed.
For Property Transaction above 50 Lakhs
The submission of the seller and the buyer’s PAN cards is a requisite for executing the transaction. The buyer is charged a TDS (Tax Deducted at Source) equivalent to 1% of the property’s value, by the law. Thus, if the deal is worth 51 lakh rupees then 51,000 rupees have to kept aside from the sum amount to be paid to the developer. The buyer will then have to duly submit the deducted amount to the Income Tax Department. The PAN has a major role to play here in TDS deduction even if the buyer isn’t a taxpayer. A Tax Deduction Account Number (TAN) is necessary for filing the TDS but the same can be done with the PAN Card by the individual taxpayers.
Owning a PAN Card is not enough for you but also assure that the seller of the property possesses the same. In the case of the seller’s PAN unavailability, it is the buyer who is the sufferer as the TDS deduction raises to 20% from the standard 1%. The TDS requires a mention of the seller’s PAN number.
For Annual Rent above 2.40 Lakhs
Section 194I of the Income Tax Act makes the payment of TDS (Tax Deducted at Source) obligatory for the tenants. Previously, the tenants had to deduct the amount equalling to 10% of the total annual rent paid to the landlord if it is exceeded 1.80 lakh rupees, which would have to be paid to the Income Tax Department. The threshold limit of the annual rent for TDS has been extended from 1.80 to 2.40 lakhs.
It is binding on the tenant to deduct 20% of the annual rent for submitting to the Income Tax Department in the absence of the landlord’s PAN Card. The landlord might even be charged a penalty of 10,000 rupees if he is unable to cite his PAN for the tax deduction.
Even the certificate stating lower TDS liability that is issued by the tax officer on the request of the landlord is not valid without the details of PAN Card.
For Tax-Free Rental Income
As the upper limit of rental income for its entry in tax deduction has been raised in this Budget, rental income below 2.40 lakhs won’t be liable to TDS. For availing the benefit of tax exemption, the landlords are needed to furnish 15H forms if they are more than 60 yrs old while those below the age of 60 shall produce 15G Forms. Both these forms make it necessary for the landlord to furnish PAN information. Or else, the form won’t be legally acceptable and the tenant would have to end up paying a TDS at 20% of the annual rent.
The validity of the certificate fully exempting the landlord from TDS issued by the tax officer also entirely depends on the presence of the PAN details.
Do the NRIs Need PAN in Realty Transactions?
There is no obligation of producing PAN Card for the NRI (Non-Resident Indian) buyer if the home country is not the source of his taxable income. But owning one can ease the process of property registration.
On the other hand, while selling his property in this country requires the NRI to produce his PAN for completing the transaction.
In the case of renting property in India, the income earned by the NRI is taxable and demands from him to produce his PAN to the tenant for the tax deduction, which is fixed at 30.9% of the annual rent paid by the tenant for the non-resident landlords.
Tips to Hassle-Free Property Registration
The Registration Act, 1908 makes provision for the registration of the sale deed to carry out property transaction.
Firstly, organize and keep all the necessary documents ready at hand on the day prior to registration.
Plan your schedule according to the working hours of the Sub-Registration Magistrate’s office, which is 9:30 am to 6 pm on any working day.
Make sure that the payment of registration and stamp duty charges are not pending before you take an appointment for the registration of the property.
You should be ready with all your property related documents accompanied by the PAN Card and identity proof such as voter ID, Aadhar Card, passport or driving licence the moment the Sub-Magistrate, the Teller and the Reader call you.
The document showing 1% TDS deduction from the property value if the deal is worth above 50 lakh rupees, has to be submitted as a proof during registration. So, do not forget to carry that along.
The role of witnesses in the registration process is not just academic under any circumstance. Their presence is mandatory and they are required to furnish valid ID proof.
The entire registration procedure involves 15 days after which, you will receive the registered documents on producing the receipt issued to you during registration. Senior citizens or women are not entitled to any privilege and have to wait in the queue at the Sub-Magistrate’s office.
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