Property buyer will end up paying 20% TDS instead of 1% for this PAN related issue
TDS typically at 1% of property value before making payment to any seller. However, there is an exception to this rule which may require you to deduct higher tax deducted at source (TDS) and it is linked to the status of the PAN of the seller.
Before buying property, you need to check the status of PAN-Aadhaar linkage of the property seller. This needs to be checked both at the time of paying token money and at the time of making the final payment for the property.
Chartered Accountant Mihir Tanna, associate director-direct tax, S.K. Patodia LLP, shares the experience of one of his clients who bought a property.
«In one of my client's cases, the seller of the property was a senior citizen, and he was not aware that his PAN was inoperative. The buyer paid token money and deducted 1% TDS without checking the seller's PAN status. Nonetheless, the Income Tax Department issued notice to the buyer for short deduction of TDS (20% for inoperative PAN less 1% deduction actually deducted) along with interest @1% per month for short deduction of TDS on token money. Although the seller made his PAN operative again by linking it with his Aadhaar and paying the fee, this happened after the token money date. So, when the buyer paid the token money and deducted TDS and filed Form 26QB, the date of transaction was recorded as the date when the token money was paid. And on this date the PAN of the seller was inoperative,» says Tanna.
Tanna further outlines the lesson property buyers must learn from this incident. He says, «Even
