If monthly rent is above Rs.8,333, landlord’s PAN is a must

Live Mint : Vivina Vishwanathan  6 Nov 2013

If your landlord doesn’t have a PAN, you have to make a declaration

If you plan to claim tax exemption under house rent allowance (HRA) for the current financial year, remember that you will have to furnish the Permanent Account Number (PAN) of your landlord if your annual rent exceeds Rs.1 lakh, or Rs.8,333 per month.

 Earlier you had to furnish PAN of your landlord only if annual rent exceeded Rs.1.80 lakh, or Rs.15,000 per month.

What’s the change?

According to a circular (http://tinyurl.com/luyxazk) issued by the Central Board of Direct Taxes (CBDT) on 10 October 2013, if annual rent paid by an employee exceeds Rs.1 lakh per annum, it is mandatory for the employee to report PAN of the landlord to the employer. 

The new circular replaces the earlier circular wherein for financial year 2011-12 onwards, CBDT had stated that while computing the tax liability employees who are paying house rent of more than Rs.15,000 per month and are claiming exemption under HRA are required to furnish a copy of the PAN card of the landlord.

What is the exemption?

Under section 10 (13A) of the Income-tax Act, if you are a salaried individual and get HRA from your employer, you are entitled for tax exemption.

 In order to claim tax exemption, you need to produce house rent receipts. For administrative ease, salaried employees who get house rent allowance up to Rs.3,000 per month don’t have to produce rent receipt.

This concession is only for the purpose of tax exemption at source. However, the assessing officer can ask for a receipt, if required, as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.

For any rent above Rs.3,000 per month, you have to produce a rent receipt to claim tax exemption.

 The actual HRA exemption that one can avail under section 10(13A) would be the minimum of the following: the actual amount of HRA received, or 50% of the salary for individuals residing in metros (Delhi, Mumbai, Chennai or Kolkata) and 40% of the salary for individuals living in non-metros, or the rent paid minus 10% of the total salary.

What should you do if your landlord doesn’t have PAN?

If your landlord doesn’t have a PAN, you have to make a declaration. According to the CBDT circular, in case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.

Download Booklet on Permanent Account Number (PAN) Released by CBDT

Income Tax department : May 23,2013


The  Income tax Department has been receiving anumber of queries relating to PAN-particularly question on procedures for PAN application, documents required for PAN application and transaction for which quoting of PAN is mandatory etc.

This booklet has been brought out for the first time under the Tax Payers Information Series.
 It is an attempt to help the taxpayers who want to apply for PAN and to explain to them the importance of PAN in their day to day functioning.

 The author Shri Neeraj Kumar, Addl. CIT, Range-39, New Delhi has taken keen interest in authoring the first edition of this booklet.


Book Contains the following Topis :-

1. What is PAN?

2. Evolution of PAN in India

3. Who must have a PAN`?

4. Financial transactions where quoting of PAN is  mandatory

5. What are the documents which can be submitted as proof of identity and proof of address?

6. FAQ on PAN

Download Booklet on Permanent Account Number (PAN) Released by CBDT

No PAN? Get reday to shell out 20% tax from tomorrow

Source:Deepshikha Sikarwar, ET Bureau, Mar 31, 2010, 12.56pm IST

   
NEW DELHI: Get ready to shell out more tax up front on any income received if you are unable to provide your permanent account number from April 1. The tax deducted at source, or TDS, on payments could be as high as 20% for those not quoting PAN against the regular rate of 2%-10%.

The Budget 2009-10 had made it mandatory for residents and non-residents to quote this number or face a higher rate of withholding tax. It comes into effect from Thursday, April 1.

The idea behind the rule is to encourage more people to obtain PAN, a 10-digit alphanumeric tax payer identification number, and thereby become visible to tax authorities. The tax base of the country is a mere 3.3 crore because of massive underreporting of incomes and large-scale exemptions.

Quoting of PAN will allow income tax authorities to establish an audit trail and catch tax evaders. Some experts feel the measure is excessive. “This would put unnecessary burden on senior citizens who do not have a tax liability,” said Kishan Malhotra, Executive Director, KPMG.

Senior citizens could just file Form 15H in absence of tax liability and become eligible for exemption from TDS. If they do not furnish a PAN they will have to face a TDS rate of 20%.

Other Indian residents not falling within the tax bracket will also have to obtain a PAN and quote it where required. Tax deducted at source can be adjusted against a taxpayer’s actual tax liability. But in the case where there is no tax liability it has to be claimed back by filing returns.

The new rule comes with a severe penalty if not followed. Any failure to deduct taxes at appropriate rates will result in disallowance of expenditure for the one making payment, recovery of tax from him, and levy of interest and penalty. Interestingly, the total number of PAN issued in the country is in excess of 8 crore. Income Tax department issues the permanent account number in partnership with UTITSL and NSDL.

With this provision coming into effect even non-residents, having just one-off transaction with Indian parties will have to obtain PAN, failing which they will suffer a much higher withholding tax on their income.

Typically, payments by residents to non-residents in the nature of royalties or fees for technical services attract withholding tax at rate of 10.56% under the Income Tax Act or at 10% under certain tax treaties in the absence of a permanent establishment or a fixed place of work in India.

Similarly, interest payments to non-residents attract withholding tax at a rate lower than 20% under certain tax treaties. The PAN is required to be quoted in document pertaining relating to sale of property, sale or purchase of a motor vehicle requiring registration other than two-wheelers. Most of the banking transactions require PAN to be quoted.