TAN Exemption for Property Buyers: Simplifying Tax Compliance for Resident Buyers

Overview

The Indian government has introduced a major relief for property buyers through Section 397 (proposed in Budget 2026). This provision aims to simplify tax compliance by removing the requirement of obtaining a Tax Deduction and Collection Account Number (TAN) for resident buyers in certain property transactions. Let’s understand the impact, benefits, and practical implications.

What is TAN and Why Was It Required Earlier?

A TAN (Tax Deduction and Collection Account Number) is a 10-digit alphanumeric number mandatory for persons deducting or collecting tax at source. In real estate transactions, buyers were required to deduct TDS under Section 194-IA (1% on property value exceeding ₹50 lakh). However, obtaining TAN was not necessary for most individual buyers because the government had already provided an alternative mechanism through Form 26QB. Despite this, confusion and procedural hurdles remained.

What is Section 397 and Why Was It Introduced?

Section 397 (as proposed) aims to provide clarity and relief to resident property buyers by simplifying compliance requirements. The objective is to: - Reduce unnecessary procedural burden. - Encourage ease of doing transactions. - Promote real estate investments. - Align tax compliance with digital filing mechanisms.

This move is part of the government’s larger focus on faceless and simplified tax administration.

Key Relief under Section 397 for Resident Buyers

Here are the major benefits: No TAN Requirement

Resident buyers purchasing immovable property will not need to obtain TAN for TDS compliance.

Simplified TDS Process

Tax can continue to be deducted using PAN through Form 26QB.

Reduced Compliance Cost

No need for separate registration or documentation for TAN.

Ease for First-Time Buyers

Helps salaried and individual taxpayers who may not be familiar with tax procedures.

Who Can Claim This Relief?

The exemption applies to: - Resident individual buyers. - HUF buyers. - Persons not engaged in business or professional tax deduction activities. - Transactions covered under Section 194-IA.

However, it does not apply to: - Non-resident buyers. - Companies or business entities regularly deducting TDS. - Transactions covered under other TDS provisions.

Impact on Real Estate Sector

This step is expected to: - Increase transparency in property transactions. - Reduce compliance barriers. - Improve tax collection through simplified reporting. - Encourage genuine property buyers. - Experts believe that the simplification will boost confidence among middle-class buyers.

Compliance Still Required

Even though TAN is not required, buyers must: - Deduct 1% TDS. - File Form 26QB. - Issue Form 16B to the seller. - Ensure correct PAN and property details.

Failure to comply may attract interest and penalties.