Is PAN card mandatory for rent agreement?

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IS PAN CARD MANDATORY FOR RENT AGREEMENT?
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Introduction
When it comes to renting a property in India,
various legal formalities need to be followed to
ensure a smooth and lawful transaction. One
common question that often arises is whether a
PAN (Permanent Account Number) card is mandatory
for a rent agreement. In this blog, we will delve
into the details of this requirement and provide
you with a clear understanding of whether you
need a PAN card for a rent agreement.
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Understanding PAN Card
A PAN card is a unique ten-digit alphanumeric
code issued by the Income Tax Department of
India. It serves as a universal identification
key for various financial transactions, including
tax payments, investments, and bank-related
activities. The primary purpose of the PAN card
is to track financial transactions and ensure tax
compliance.
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Rent Agreement and PAN Card
A rent agreement, also known as a lease
agreement, is a legal document that outlines the
terms and conditions between a landlord and a
tenant regarding the rental of a property. While
a PAN card is not a mandatory document for
drafting a rent agreement, its requirement can
vary based on specific circumstances.
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When a PAN Card is Required
In certain cases, it is mandatory to provide the
PAN details of the landlord when drafting a rent
agreement. According to Section 139A of the
Income Tax Act, if the annual rent amount exceeds
Rs. 1,80,000, the tenant is obligated to deduct a
certain percentage of tax (TDS) from the rent
paid and remit it to the Income Tax Department.
To do so, the tenant must possess the PAN details
of the landlord. Whether you are a landlord or
tenant. You should know your legal right of the
tenant and landlord.
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Importance of PAN for TDS Deduction
If the landlord's PAN details are not provided,
the tenant is required to deduct TDS at a higher
rate of 20 as per Section 206AA of the Income
Tax Act. However, if the landlord is eligible to
claim a lower tax deduction or exemption, they
can submit Form 15G or Form 15H to the tenant,
requesting for TDS to be deducted at a lower rate
or not to be deducted at all. In such cases, the
PAN card becomes crucial to validate the
landlord's income and tax liability.
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