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20% TDS on Property Purchase
In the realm of property transactions, a new hurdle has emerged for buyers: the seller’s PAN and Aadhaar link. Failure on the part of the property seller to complete this crucial linking could lead to buyers facing a hefty 20% Tax Deducted at Source (TDS) on their property purchase (20% TDS on property purchase) instead of the standard 1%. In this article, we unravel the intricacies of this development and shed light on the consequences and solutions for property buyers.
The Standard Procedure: 1% TDS for Property Purchases Above Rs 50 Lakh
The Income-Tax Act stipulates that buyers of properties valued at Rs 50 lakh or above must pay 1% TDS to the central government. The remaining 99% of the total cost is disbursed to the seller, who can later claim it as credit. This standard procedure is aimed at streamlining financial transactions in the real estate sector.
Notices from the I-T Department
Nearly six months after the deadline for linking Aadhaar and PAN cards, the Income Tax (I-T) department has initiated action against buyers who have purchased properties exceeding Rs 50 lakh. Notices have been dispatched, demanding a significant 20% TDS on their property purchase. The trigger for these notices is the seller’s failure to link their PAN with Aadhaar.
Chartered Accountants’ Insights: PAN-Aadhaar Linkage Urgency
Chartered accountants, analyzing the situation, highlight that many property buyers are now receiving notices due to the seller’s neglect in linking their PAN with Aadhaar. In numerous cases, the property seller’s PAN card becomes inoperative, resulting in buyers facing TDS dues for transactions above Rs 50 lakh. The call from chartered accountants is clear: property sellers, alongside contractors, brokers, and professionals, should prioritize linking their PAN and Aadhaar to avoid complications for property buyers.
Government’s Mandate: Mandatory PAN-Aadhaar Linkage
The government’s push for digitalization and a unified tax system has made the linking of PAN with Aadhaar mandatory. This move aims to eliminate the possession of multiple PANs by individuals and enhance the tracking of financial transactions. Section 139AA of the Income-tax Act mandates individuals eligible for Aadhaar to quote it in PAN applications and income tax returns. The Honorable Supreme Court has affirmed these provisions. The original deadline for Aadhaar-PAN linking was March 31, 2022, and failure to comply can result in an inoperative PAN, unprocessed refunds, and higher taxes.
In conclusion, the interplay of PAN-Aadhaar linkage and TDS obligations in property transactions presents a critical juncture for both buyers and sellers. Buyers need to be vigilant about the seller’s compliance with PAN-Aadhaar linkage to avoid the hefty 20% TDS. Simultaneously, property sellers, must consider the implications of non-compliance and take proactive measures to link their PAN with Aadhaar. As the government continues its drive towards a digitalized and unified tax system, staying informed and ensuring compliance with these regulations is paramount for all stakeholders in the real estate sector. Stay tuned for more updates on the evolving landscape of PAN-Aadhaar linkage and its impact on financial transactions.
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