PAN (Permanent Account Number) is a 10 digit alphanumeric number, issued by the Income Tax Department, in a card form. It enables the Income Tax Department to link the transactions of the person with the Department and thereby, .acts as an identity of the person.
PAN is required to be quoted on the return of income or any other correspondence with the Income tax department or in the challans for payment of sum due under the Income Tax Act,1961 or any other documents prescribed. So, ultimately PAN acts as an identification key for tracking the tax evasion in a particular high-value transaction.
The rules regarding quoting of PAN in some specified transactions are contained in Rule 114B of the Income Tax Rules,1962. With effect from 1 January,2016, the Central Board of Direct Taxes has amended the rules regarding reporting of PAN with respect to specified transactions, to keep a check on tax evasion and curb the circulation of black money. Basically, the monetary limits of transactions which require quoting of PAN have been changed.
Here are the key changes to the list of transactions as specified under Rule 114B; along with their respective monetary limits where quoting of PAN in all documents pertaining to such transactions becomes mandatory.
1) Transactions related to Vehicles:
Sale or purchase of a motor vehicle or vehicle, as defined under the Motor Vehicles Act,1988, which requires registration by a registering authority under Chapter IV of that Act.
Note: Two wheeled vehicles are not covered here.
Monetary limit: All such transactions.
2) Transactions related to Banks:
(i) Opening an account with a Banking company or a Co-operative bank to which the Banking Regulation Act,1949, applies (including any bank or banking institution referred to in Section 51 of that Act).
Note: Account related to time-deposit and Basic Saving Bank Deposit Account is not covered here.
Monetary limit: All such transactions.
(ii) Making an application to any Banking company or a Co-operative bank to which the Banking Regulation Act,1949, applies (including any bank or banking institution referred to in Section 51 of that Act) or to any other company or institution.
Note: Purpose of application is the issue of a credit or debit card.
Monetary limit: All such transactions.
(iii) Deposit with a Banking company or a Co-operative bank to which the Banking Regulation Act,1949, applies (including any bank or banking institution referred to in Section 51 of that Act).
Monetary limit: Deposits in cash exceeding Rs.50,000 during any one day.
(iv) Purchase of bank drafts or pay orders or banker's cheques from a Banking Company or a Co-operative bank to which the Banking Regulation Act,1949, applies (including any bank or banking institution referred to in Section 51 of that Act).
Monetary limit: Payment in cash for an amount exceeding Rs.50,000 during any one day.
(v) Payment to a Banking company or a Co-operative bank to which the Banking Regulation Act,1949, applies (including any bank or banking institution referred to in Section 51 of that Act) or to any other company or institution.
Note: Payment is for one or more pre-paid payment instruments (as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007).
Monetary limit: Payment in cash or by way of a bank draft or pay order or banker's cheque of an amount aggregating to more than Rs.50,000 in a financial year.
COMMON IN ALL 5 POINTS ABOVE: Transactions are with a Banking company or a co-operative bank to which the Banking Regulation Act,1949, applies.
3) Transactions related to securities and units:
(i) Opening of a demat account with a depository, participant, custodian of securities or any other person registered under the SEBI Act,1992.
Monetary limit: All such transactions.
(ii) Payment to a Mutual Fund.
Note: Purpose is purchase of it's units.
Monetary limit: Amount exceeding Rs.50,000.
(iii) Payment to a company or institution.
Note: Purpose is acquisition of debentures or bonds issued by it.
Monetary limit: Amount exceeding Rs.50,000.
(iv) A contract for sale or purchase of securities as defined under the Securities Contracts (Regulation) Act,1956.
Note: Shares are not covered in securities here.
Monetary limit: Amount exceeding Rs.1 lakh per transaction.
(v) Sale or purchase, by any person, of shares of a company which is not listed on a recognized stock exchange.
Monetary limit: Amount exceeding Rs.1 lakh per transaction.
4) Transaction related to securities and banks:
Payment to the Reserve Bank of India, constituted under the Reserve Bank of India Act,1934.
Note: Purpose is acquisition of bonds issued by it.
Monetary limit: Amount exceeding Rs.50,000.
5) Transaction related to hotel/restaurant:
Payment to a hotel or restaurant against a bill or bills at any one time.
Monetary limit: Payment in cash of an amount exceeding Rs.50,000.
6) Transaction related to travel:
Payment in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
Monetary limit: Payment in cash of an amount exceeding Rs.50,000.
7) Transaction related to time deposit:
Time deposit with,
(i) a banking company or a co-operative bank to which the Banking Regulation Act,1949 applies (including any bank or banking institution referred to in Section 51 of that Act);
(ii) a Post office;
(iii) a Nidhi referred to in the Companies Act,2013; or
(iv) a Non-Banking Financial Company which holds a certificate of registration under the Reserve Bank of India Act,1934, to hold or accept deposit from public.
Monetary limit: Amount exceeding Rs.50,000 or aggregating to more than Rs.5 lakhs during a financial year.
8) Transaction related to Insurance:
Payment as life insurance premium to an insurer under the Insurance Act,1938.
Monetary limit: Amount aggregating to more than Rs.50,000 in a financial year.
9) Transaction related to Immovable property:
Sale or purchase of immovable property.
Monetary limit: Amount exceeding Rs.10 lakhs or valued by Stamp Valuation Authority referred to in Sec.50C of the Act at an amount exceeding Rs.10 lakhs.
10) Transaction related to other sale/purchase:
Sale or purchase, by any person, of goods or services of any nature other than covered in above points.
Monetary limit: Amount exceeding Rs.2 lakhs per transaction.
The above mentioned transactions as divided in 10 categories require the quoting of PAN.
Meaning of 'Payment in connection with travel' referred to in Point 6 above: Payment towards fare, or to a travel agent or a tour operator, or to an authorized person under FEMA,1999. Here 'travel agent or tour operator' is a person who makes arrangements of air, surface or maritime travel or provides services relating to tours, accommodation, visa and other travel related services either severally or in package.
Case where the person entering into such transactions is a Minor:
A Minor, not having any taxable income, if enters into any of the transactions requiring quoting of PAN, shall quote PAN of his father or mother or guardian in the relevant document.
Case where the person entering into such transactions does not have PAN:
The person shall make a declaration in Form No.60, giving therein the particulars of such transaction.
Responsibility of the persons receiving the documents on which assessee quotes his/her PAN:
Such persons are responsible for verifying the PAN and ensuring that it has been duly and correctly mentioned in the documents, or, a declaration in Form No.60 has been duly furnished with complete particulars. Also, the person responsible for raising bills in a few transactions will ensure the same.
Rule 114C specifies some persons in this regard as the persons receiving the documents on which assessee quotes his/her PAN.
Rule 114D: It specifies the time and manner of furnishing a statement in Form No.61 containing particulars of Form No.60, through online transmission of data electronically, by the persons referred to in Rule 114C including those who raise bills, and who is required to get his accounts audited u/s 44AB of the Income Tax Act,1961.
Rule 114D requires the furnishing of online statement in Form No.61 by:
(i) 31st October of that year, where declarations are received by 30th September;
(ii) 30th April of the F.Y. immediately following the F.Y. in which the form is received, where the declarations are received by 31st March.
With Circular No.14/2016, dated 18th May,2016, CBDT has decided that filling of all the fields in Form No.60 shall be considered to be mandatory in respect of transactions entered on or after 1/4/2016.
Non-applicability of quoting PAN:
The Rule 114B regarding the mandatory quoting of PAN in case of some transactions specified therein, shall not apply to the following classes of persons:
(i) The Central Government, the State Government and the Consular Offices;
(ii) The Non-residents in respect of transactions referred to in Point 2 (ii),(iv),(v), Point 4, Point 5, Point 6 and Point 10 as mentioned above.
What if the PAN is not quoted or wrong PAN is quoted intentionally in the above transactions?
In case of non-quoting of PAN or intentional wrong quoting of PAN, penalty is levied under Section 272B as per which the Assessing Officer may impose an amount of Rs.10,000 on the person undergoing such transaction. But, before imposing the penalty, the Act provides an opportunity of being heard to the person so that he/she may explain the reason for the same.
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