The government has proposed a relaxation from the requirement to obtain a Tax Deduction and Collection Account Number (TAN) for certain property transactions involving non-resident sellers.
Existing Legal Position under Section 397
Section 397(1)(a) of the Income-tax Act mandates that every person deducting or collecting tax must obtain a TAN from the Assessing Officer. Clause (c) of the same sub-section lists specific cases where obtaining TAN is not mandatory.
At present:
- When an immovable property is purchased from a resident seller , the buyer is not required to obtain TAN for deducting tax at source.
- However, when the seller is a non-resident , even a one-time buyer is required to obtain TAN to comply with TDS provisions.
This requirement has been widely viewed as an unnecessary compliance burden , especially for resident individuals and Hindu Undivided Families (HUFs) involved in a single, non-recurring property transaction.
Proposed Amendment: Relief for Individuals and HUFs
To address this issue, the government has proposed an amendment to Section 397(1)(c) of the Act. Under the proposed change:
- A resident individual or Hindu Undivided Family will not be required to obtain TAN for deducting tax at source on consideration paid for the transfer of any immovable property,
- Provided the transaction falls under Section 393(2) (Table Sl. No. 17),
- Even where the seller of the immovable property is a non-resident.
This amendment significantly simplifies compliance for resident buyers by eliminating the need to apply for TAN solely for a single property purchase.
Effective Date
The proposed amendment will come into effect from 1 October 2026 , subject to enactment.
Key Takeaway
The removal of the TAN requirement for resident individuals and HUFs purchasing property from non-residents is a major step towards ease of compliance and ease of doing business . While the obligation to deduct and deposit TDS continues, the procedural burden of obtaining a separate TAN for a one-time transaction will no longer apply.
Official copy of the Clause is as follows
Relaxation from requirement to obtain tax deduction and collection account number (TAN) by a resident individual or HUF, where the seller of the immovable property is a non-resident
Section 397(1)(a) of the Act provides that every person, deducting or collecting tax shall apply to the Assessing Officer for the allotment of a "tax deduction and collection account number" (TAN). Clause (c) of the said sub-section provides for cases where a person is not required to obtain TAN.
2. Presently, if a person buys an immovable property from a resident seller, the person is not required to obtain (TAN) to deduct tax at source. However, where seller of the immovable property is a non-resident, the buyer is required to obtain TAN to deduct tax at source. This creates unnecessary compliance burden for the buyer, as he would need TAN for a single transaction.
3. In order to reduce compliance burden for the resident individual and Hindu undivided family, it is proposed to amend section 397(1)(c) of the Act to provide that resident individual or Hindu undivided family, is not required to obtain TAN to deduct tax at source in respect of any consideration on transfer of any immovable property under section 393(2) [Table Sl. No.17].
4. The amendment will take effect from the 1st day of October, 2026.
[Clause 75]
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