Property deals: Mismatch in sale value, TDS, returns may invite scrutiny

New Delhi, Oct 13, 2025

Quoting false PAN can lead to a penalty of ~10,000 per default; wilful concealment can even result in imprisonment

Many property transactions escape the taxman’s scrutiny because false or fictitious PANs are used during registration. Such practices make it difficult for the Income-tax (I-T) Department to trace the actual parties involved in a transaction.

Evading reporting requirements

The I-T Department gathers data on property transactions through reports filed by registrar offices under Section 285BA of the Income-tax Act and Rule 114E of the Income-tax Rules. Registrars and sub-registrars must report transactions involving immovable property valued at ₹30 lakh or more through Form 61A.

“Individuals evade reporting by quoting incorrect, invalid, or fictitious PANs, or those belonging to others, to conceal their identity and prevent cross-linking in the Income-tax database,” says Suresh Surana, a Mumbai-based chartered accountant. Some transactions are executed using benami or proxy names.

Property values are understated in sale deeds. “Cash components are excluded from the official sale deed to understate the transaction value and reduce stamp duty and tax liabilities,” says Shefali Mundra, chartered accountant and tax expert, ClearTax.

Reporting requirements

Under Rule 114B, quoting a valid PAN is mandatory in property transactions above ₹10 lakh. “Both buyer and seller must provide their PAN at the time of registration to ensure traceability of high-value transactions,” says Mundra.

Registrars and sub-registrars must report high-value deals through the Statement of Financial Transactions (SFT). SFT-reported transactions appear in the taxpayer’s Annual Information Statement (AIS).

Documents required

Buyers and sellers must provide valid identification and financial details at the time of registration. Required documents include PAN, Aadhaar, and address proof such as voter ID, passport, or driving licence. Those without a PAN must submit Form 60 with supporting documents.

“In high-value transactions, registrars may ask for bank statements or a copy of the sale agreement showing the full consideration value,” says Mundra.

Consequences of using incorrect PAN

Quoting a false or incorrect PAN during property registration can invite penalties and prosecution. “A penalty of ₹10,000 per default is imposed under Section 272B(1). If done with intent to mislead or conceal identity, prosecution under Section 277 may follow, leading to rigorous imprisonment and fine,” says Surana.

Serious cases may be investigated under the Prohibition of Benami Property Transactions Act, 1988, and the Prevention of Money Laundering Act, 2002.

“The use of fictitious PAN can trigger tax assessment or reassessment. Such discrepancies can also lead to cancellation of registration, title disputes, and rejection of bank loans linked to the property,” says Mundra.

TDS requirements

According to Section 194-IA, the buyer of a property exceeding ₹50 lakh must deduct 1 per cent tax deducted at source (TDS) and deposit it through Form 26QB within the due date. “The provision applies to all properties except rural agricultural land where the sale consideration or stamp duty value exceeds ₹50 lakh,” says Pallav Pradyumn Narang, partner, CNK.

“The buyer must report the PAN of both parties and issue Form 16B (TDS certificate) to the seller,” says Deepashree Shetty, partner, global employer services, tax and regulatory services, BDO India.

Cross-verification by Department

The I-T Department uses a multi-layered system to cross-check transactions. “High-value deals over ₹30 lakh are captured through the SFT,” says Ankit Jain, partner, Ved Jain and Associates. Property transactions above ₹50 lakh also require the buyer to deduct 1 per cent TDS. The data from SFT and TDS filings are integrated into the taxpayer’s AIS and Form 26AS.

“The Department uses data sources such as Form 26QB (filed by the buyer) and Form 61A (filed by the registrar),” says Shetty.

“The verification process checks for consistency between declared income in the income-tax return (ITR) and property transaction data and TDS deposits. Any discrepancies result in follow-up investigations or notices,” says Jain.

Mistakes to avoid

When claiming capital gains exemption, buyers must report the full sale consideration and separately mention the exemption for proper reconciliation by the tax department.

In joint transactions, each buyer must deduct tax separately for each seller. One buyer cannot deduct TDS for all.

“The 1 per cent TDS applies to the entire sale consideration or stamp duty value, not just the amount exceeding ₹50 lakh,” says Narang.

Buyers of under-construction properties must deduct TDS on every payment. “Non-deduction on interim payments can result in the imposition of interest and penalties. The value of add-ons such as garages, common areas, club memberships, and other amenities is also subject to TDS,” says Narang.

Section 194-IA applies only to resident sellers, while Section 195 applies to non-residents, where TDS rates are much higher. Shetty suggests that after depositing TDS, buyers should ensure the amount is correctly reflected in Form 26AS, which may take a couple of days.

Preserve these documents

Property-related: Registered sale deed, agreement to sale, occupancy and completion certificates, property tax receipts, and no-objection certificates

Identity proofs: PAN, Aadhaar, and address documents of both parties

Payment proofs: Bank transfer details, cheque copies

Tax-related: TDS payment acknowledgements, certificates

Capital gains exemption: Receipts of investments in Section 54EC bonds, valuation reports for properties bought before 2001

[The Business Standard]