Investing in property? Documentation, correct PAN, source of funds — How to ensure you avoid any tax notice for property

Are you planning to invest in a real estate purchase? We asked experts how many properties can be registered on a single PAN and at what threshold must property transactions be reported to the income-tax department, and how to ensure you avoid any tax notice for property.

Here’s what they suggested…

Property registrations on a single PAN

According to Amit Ganatra, Executive Director at Khaitan & Co, there is no specific numerical limit under the Indian Income tax Act / Rules on how many properties a person can buy or register using the same PAN.

Dinkar Sharma, Company Secretary and Partner at Jotwani Associates concurred, adding that it is possible for an individual to own multiple residential or commercial properties, “as long as the transactions are bona fide and the source of funds used for the purchase is explainable”.

Threshold to report property transactions

Sharma cited the Statement of Financial Transactions (SFT) reporting requirements, which state that a purchaser or vendor of immovable property “should get such a transaction reported by the concerned registration authority when the value of the transaction or the stamp duty value is ₹30 lakh or more”.

He added that there is another provision regarding TDS: “In case of purchase of any immovable property, other than specified agricultural land, from a resident vendor, the person purchasing such immovable property (buyer) will normally have to make the deduction of TDS at 1% if the value of sale consideration or stamp duty value is ₹50 lakh or more.”

Ganatra provided a checklist according to the new I-T Rules (applicable for FY 2026-27 onwards) where PAN is required, as follows:

• For purchase, gift, sale or joint development agreement (JDA) in respect of immovable property exceeding ₹20 lakh,
• SFT reporting by Registrar or Sub-Registrar for purchase, gift, sale or JDA in respect of immovable property exceeding ₹45 lakh,
• Deduction of TDS on purchase of immovable property exceeding ₹50 lakh,
• Reporting of immovable property in ITR (Schedule AL) in case total income of individual exceeds ₹1 crore,
• Reporting of properties in Schedule – HP (House Property) of ITR (either as self-occupied or deemed to be let out).

Why could buyers receive I-T notice?

Sharma noted that buying a property does not automatically create an income-tax liability for the buyer. “However, the buyer must be able to explain where the money used for the purchase came from. It could be salary, business income, accumulated savings, a bank loan, inheritance or another legitimate source,” he added.

According to him, a notice may be sent if the purchase appears to be out of place in relation to the income of the buyer, there is lack of information about the source of funds, PAN details are wrong or required TDS has not been deducted or paid.

“Thus, for example, if a person has declared only a small amount of income and still buys an expensive property, the tax authorities may question him on the source of his funds to buy the property. This does not mean that he has evaded tax. He needs to produce appropriate evidence of the source of funds such as registered sale deed, bank statements, loan papers, etc.,” Sharma added.

Ganatra listed the department may enquire or issue notice about:

• Sources of funds,
• Withholding tax non-compliance,
• Mismatch in tax records (AIS, Form 26AS and income tax return),
• Difference between consideration and stamp duty value beyond permissible threshold etc.

He added that if a notice is not explained properly by way of adequate explanation / documentation, “may result in treatment of immovable property as unexplained investments which has far reaching income tax and penal consequences”.

So, what should buyers do?

Sharma added that in case of receipt of an I-T notice, one needs to file reply within the stipulated time along with the necessary supporting documentation.

Ganatra noted that as a matter of abundant precaution, an individual should maintain sufficient documentation for every immovable property transaction. Such documentation shall include:

• Registered sale deed,
• Stamp duty records,
• Evidence regarding source of payment,
• Payment evidence,
• Bank statements,
• Buyers PAN,
• Proof of ownership of property by the seller,
• Reconciliation of income tax records,
• Loan documents etc.

“The important lesson for buyers of properties is to ensure that correct PAN and identity details are mentioned in the sale deed, to pay through traceable banking channels wherever possible, to comply with relevant TDS requirements and to have documents to support the source of funds,” Sharma added.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.