Tax Authorities Tighten Scrutiny on Property Deals to Curb Benami Transactions and Fake PAN Misuse

Thousands of real estate transactions across India are escaping regulatory scrutiny due to fake PAN details and deliberate misreporting. The Income Tax department has intensified efforts by inspecting registrar records and initiating a data-backed compliance drive to address tax evasion through property deals.

Use of Fake PANs in Property Deals Above ₹30 Lakh

Property registrars are legally required to report purchases and sales worth ₹30 lakh or more. However, several transactions are being filed using incorrect or fictitious PANs, effectively keeping them hidden from tax authorities. In some instances, parties collude with registrar officials to submit false records, undermining the reporting system intended to trace large financial activities.

Wider Scrutiny to Identify Benami and Undeclared Wealth

The Income Tax department is conducting extensive inspections in cities like Varanasi, Bhopal, Lucknow, Kanpur and Gorakhpur. These efforts are part of a strategic campaign to dismantle benami holdings and capture undeclared income parked in immovable assets. Field formations have been tasked with surveys and inspections based on central data analysis.

Read More: ITR Refund for FY25: Wrong Tax Deduction Claims Can Cost You 5x More!

Possible Reforms to Strengthen Ownership Verification

To prevent recurring misuse, mandatory e-verification of PAN and Aadhaar before any property registration is being considered. This could significantly improve transparency, ownership validation, and limit opportunities for fraud within the system. Linking identity to each transaction can enhance accountability and traceability.

Banking Channels Under the Scanner for Misreporting

Under Rule 114E, banks must report cash transactions beyond set thresholds. Some co-operative banks, especially those with poor internal controls, are reportedly failing to disclose sizable deposits and withdrawals. This discrepancy delays accurate detection and reevaluation of individual wealth profiles.

Annual Information Statements Drive Reassessment

Data from property registrars and banks feeds into taxpayers' Annual Information Statements. Mismatches between reported transactions and self-declared income spark re-evaluation. Hence, accurate and full reporting at the source remains essential for effective tax accountability and improved voluntary compliance.

Conclusion

The misuse of fake PANs in high-value realty transactions poses a serious challenge to India’s tax compliance framework. With expanded surveillance and potential for digital verifications, authorities aim to eliminate loopholes that enable hiding wealth and evading taxes through property deals.

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