What are the tax implications of selling property without a PAN?
- If you do not have a PAN, the buyer is obligated to deduct tax at the higher of the prescribed rates – 20% as per Section 206AA of the Income Tax Act, 1961.
My sister and I inherited a property from our mother in in 2020. I’m a US citizen with an Overseas Citizenship of India (OCI) card, while my sister lives in India. Both of us are now selling the property to an Indian. The buyer has requested my PAN details to deduct TDS. However, I do not have a PAN in India. What are the consequences of not having PAN for this transaction?
-Name withheld on request
The property in question qualifies as a long-term capital asset. The sale of such immovable property in India by non-residents is now subject to a tax of 12.5% (plus surcharge and cess) on the capital gains, with no benefit of indexation. Consequently, the buyer is required to deduct the corresponding tax amount when making the payment of sale consideration to you. (In practice, in the absence of a lower/nil tax deduction certificate from the tax officer, the buyer will deduct tax based on the full sale consideration, rather than just the capital gains amount.)
However, if you do not have a PAN, the buyer is obligated to deduct tax at the higher of the prescribed rates – 20% as per Section 206AA of the Income Tax Act, 1961, which is assumed to include both surcharge and education cess. After deducting TDS, the buyer will provide a transaction-based report (instead of Form 16A) detailing the transaction for non-resident deductees without a PAN.
Without a PAN, you will neither be able to file your income tax return in India nor claim a refund of any excess TDS the buyer may have deducted. This could lead to a significant loss if the actual tax liability is lower than the TDS amount. Also, not having a PAN could cause complications in the future, particularly if there is a reopening of the assessment, as you may face practical challenges in claiming the TDS deducted in the transaction. Therefore, it is strongly recommended that you obtain a PAN to avoid potential losses.
Harshal Bhuta is partner at P. R. Bhuta & Co. Chartered Accountants
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First Published:9 Dec 2024, 01:47 PM IST
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