Property Transactions Without Seller’s PAN

What Buyers Should Do If the Seller Doesn’t Have A PAN In Property Transactions

In India, purchasing property can sometimes occur even if the seller lacks a Permanent Account Number (PAN). While having a PAN is mandatory for monetary transactions, some property owners, especially in rural regions or older individuals, may not possess one.

Understanding how to navigate this situation, where significant financial stakes are involved, is crucial for a legally compliant property transaction. The absence of a seller’s PAN can lead to various challenges, particularly concerning tax deduction at source (TDS) and the legitimacy of the deal.

According to Section 194-IA of the Income Tax Act, if the property consideration exceeds fifty lakh rupees, buyers must deduct TDS at a rate of one percent of the property’s value during the payment. This deduction necessitates that the seller’s PAN be included for proper documentation and tax crediting.

There are cases where not having a PAN card does not entirely impede a property transaction. However, it may require extra effort. Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited, explains, “Although the lack of a PAN card presents challenges, it does not necessarily halt the transaction. Compliance with alternative tax measures and procedures will become important.”

Sellers keen on conducting transactions should try to obtain a PAN Card. The process is relatively straightforward and can be done online or at designated centers. If time permits, this option streamlines the transaction process. LC Mittal, Director of Motia Builders Group, emphasizes, “In today’s context, acquiring a PAN card is more accessible. Buyers should assist sellers in understanding the importance of a PAN and guide them through the application process, which takes about 15 days.

For those buyers unable to secure a PAN due to time constraints or other reasons, alternative options exist. They can fill out Form 60, a declaration for individuals engaging in transactions without a PAN. However, this option comes with its own responsibilities and risks.

When using Form 60, buyers must ensure the seller provides valid proof of identity and address, that the initial Fulfilment Agreement includes all necessary details, and that the transaction is reported to the Income Tax Department, with all related paperwork retained for future reference. Aman Gupta, Director of RPS Group, notes, “Form 60 serves as an alternative solution. However, buyers should maintain a comprehensive record of all communications and documentation related to the transaction, including any discussions about obtaining a PAN.”

For high-value transactions, buyers should exercise additional caution. This may involve hiring a property lawyer to review the transaction and ensure compliance with all legal requirements, conducting thorough due diligence on both the property and seller, keeping detailed records of requests for the seller’s PAN, and collaborating with banks to ensure all payments and legal obligations are met.

Additionally, buyers need to be aware of the implications for TDS compliance. If the seller does not have a PAN, the TDS rate increases to 20% under Section 206AA of the Income Tax Act, which significantly impacts the financial arrangements of the transaction. Buyers must also consider the risk of future scrutiny by tax authorities. Although Form 60 is legally valid, it can raise questions and lead to excessive scrutiny from revenue officials.

Effective documentation, careful planning, and legal compliance are vital when navigating such situations. Even in the absence of a seller’s PAN, with the right approach and attention to detail, it is still possible to complete a legitimate property sale.