Property buyers were facing the consequences of sellers not having PAN or being inactive.
Property buyers: In the last one year, notices were sent to about 16,500 home buyers across the country asking them to deduct additional TDS (Tax Deducted at Source) on the property they purchased. In the notice of the tax department, it was said that despite the PAN of the sellers being in-active, they had deducted less tax. The Income Tax Department on April 23 has issued a circular giving a big relief to home buyers who are not required to pay Tax Deducted at Source (TDS) due to the Permanent Account Number (PAN) of property sellers being in-operative. Short Deduction Demand Notice notice was issued.
With this circular, home buyers have got relief from the liability of tax notice against TDS deductions, provided the seller selling the property to them links their PAN and Aadhaar by May 31. According to income tax rules, if the value of the property being purchased is more than Rs 50 lakh, then home buyers have to deduct 1% TDS of the sale price and deposit it with the government.
What are the rules?
If the seller of the property does not have a PAN or is considered inoperative, the TDS rate increases to 20%. According to the rules effective from July 1, 2023, if PAN is not linked to Aadhaar, PAN is considered in-operative. In such a situation, home buyers who were not aware of the validity of the PAN and its linking with Aadhaar or failed to verify it and TDS was deducted at the standard rate of 1%, received TDS short notices containing details of the seller’s PAN. In case of being in-active, an additional 19% payment was demanded.
In January, Moneycontrol had reported that many home buyers were receiving tax notices regarding shortfall of TDS. According to information obtained through a Right to Information (RTI) by one of the affected home buyers, 16,439 short deduction demand notices were issued to buyers between July 1, 2023, and January 10, 2024, including the PAN of the property seller. The reason given was being inoperative.
Notice of short deduction of 19% on properties worth more than Rs 50 lakh works out to a minimum of Rs 9.5 lakh for each home buyer. Higher the value of the property, higher will be the demand for TDS Short Deduction Demand Notice. Thus, the latest circular of the tax department has given a big relief to these home buyers.
What was said in the circular?
The circular issued on April 23 took note of the complaints of those who had received short deduction demand notices from the Central Board of Direct Taxes (CBDT) seeking reduction of TDS. It has been said in the circular that in order to redress the complaints of such deductors/collectors, the Board has made a partial amendment and has issued instructions in the order of Circular No. 03/2023 that the transactions made till 31.03.2024- There will be no additional tax liability on deductors/collectors for deducting/collecting tax for donations and in cases where PAN is activated on or before 31.05.2024 (due to linking with Aadhaar).
Home buyers will have to do this work
This means that the buyer will have to request the seller to link his PAN with his Aadhaar to get the tax notice rejected. A former vice-chairman of the Income Tax Appellate Tribunal (ITAT) said on the condition of anonymity that this circular will prove helpful to many home buyers in getting the unfair tax notices rejected. However, the Income Tax Department should have made such a provision that the responsibility of linking PAN and Aadhaar would have been on the seller instead of the buyer and the short deduction demand notice should have been given to the seller.
Notice should have been issued to the seller, not the buyer: Former Vice President
The former Vice President believes that this circular has provided relief to home buyers, but such notices should not have been sent to them. Dr Rakesh Bansal, a 70-year-old resident of Lucknow, who received a TDS short notice of Rs 11.4 lakh soon after buying a house, says, “The person or team responsible should be punished, who did not update the portal as soon as the notification was received? Why should the property buyer be penalized when the seller’s PAN is not linked to his Aadhaar?” He said that most of the home buyers who received short deduction demand notices did not get any solution from the Income Tax Department. Some were forced to file a writ in the court.
Vishal Verma, 38, an IT professional from Bengaluru, who filed the writ petition (a petition challenging government action), said, “There was no mistake of mine. I followed the procedure yet I had to face this situation, “Because the TDS portal was not updated as per the new notification. I sent several emails to TDS CPC (Central Processing Centre) and CBDT, but did not get any response.”
In the end Verma had to file a writ petition in the Delhi High Court. Its next hearing is on May 13. Verma said, “CBDT has not yet given an affidavit in my case. However, they have filed affidavits on the cases of other buyers of our group. In those affidavits, CBDT justified its decision of 20% reduction. Was.” However, now after the implementation of the new circular, it is expected that CBDT will file a new affidavit.
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