The Income Tax Department has introduced new draft regulations aimed at simplifying the property transaction process, particularly for lower-value properties. The proposed changes involve eliminating the necessity to provide a Permanent Account Number (PAN) for property sales or purchases valued under Rs 20 lakh. If these proposals are finalized, the adjustments will take effect on April 1, 2026, as part of the Draft Income Tax Rules, 2026 under the new income tax framework.

Increased PAN Requirement Threshold

Currently, individuals are required to quote their PAN when engaging in property transactions exceeding Rs 10 lakh. The new draft suggests that this threshold will be raised to Rs 20 lakh, thereby making it unnecessary to disclose a PAN for transactions below this amount. However, transactions valued at Rs 20 lakh or more would remain subject to the existing PAN disclosure requirements.

Specific Exemptions and Reporting Rules

The draft further clarifies that certain types of property transfers, such as those executed through gifts or joint development agreements, will still fall under the PAN reporting criteria if their value surpasses the stipulated limit. This provision is designed to ensure that significant property transfers are still monitored effectively.

Rationale Behind the Proposal

The government’s motivation for this change stems from the substantial rise in property prices over recent years. The existing threshold of Rs 10 lakh often encompassed even modest transactions, prompting the decision to adjust it to Rs 20 lakh. This amendment aims to align the regulations with current market conditions, particularly benefiting smaller buyers engaged in property transactions in less urbanized areas or dealing with family-owned properties. By reducing paperwork for lower-value transactions, the government aims to facilitate a smoother process for these buyers.

Continued Requirement for Higher Value Transactions

It is important to note that the proposal does not eliminate the requirement for PAN in higher-value property transactions. Properties valued at Rs 20 lakh or above will still require the disclosure of PAN information. This measure is essential for tax authorities to connect property purchases with individuals’ income records, thereby monitoring high-value real estate transactions effectively. The PAN reporting mechanism is also intended to assist in tracking potential tax evasion and ensuring transparency within the property market.

Possible Impact on Compliance

The implementation of this proposed change would likely ease compliance burdens for smaller property transactions while maintaining stringent reporting requirements for those above the Rs 20 lakh threshold. By updating the rules, the government appears to recognize shifts in market dynamics and seek to make property transactions more accessible, particularly for individuals engaging in transactions that reflect the realities of present-day valuations.

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