Amendment of Income Tax Rule of PAN for specified transactions

The CBDT has announced that Rule 114B of Income Tax, relating to quoting of PAN for specified transactions, has been amended effective from 1st Jan., 2016.

Why such amendment?

To bring a balance between burden of compliance on legitimate transactions and the need to capture information relating to transactions of higher value.
To enhance limits of specified transactions for mandatory quoting of Permanent Account Number (PAN).
Expected to be useful in widening the tax net by non-intrusive methods.
Expected to help in curbing black money and move towards a cashless economy.

The Income Tax Deptt and Govt. collects information of certain types of transactions from third parties in a non-intrusive manner, to curb the circulation of black money and widening of tax base, and hence there is a requirement of quoting of PAN in certain specified transactions of the amount beyond certain limits.

What if you don’t have PAN?

Persons who do not hold PAN are required to fill a form and furnish any one of the specified documents to establish their identity.

Background :

One of the recommendations of the Special Investigation Team (SIT) on Black Money was that quoting of PAN should be made mandatory for all sales and purchases of goods and services where the payment exceeds Rs.1 lakh. Accepting this recommendation, the Finance Minister made an announcement to this effect in his Budget speech.

The Government has since received numerous representations from various quarters regarding the burden of compliance this proposal would entail. Considering the representations, it has been decided that quoting of PAN will be required for transactions of an amount exceeding Rs.2 lakh regardless of the mode of payment.

What are the monetary limits for quoting of PAN ?

1. For sale or purchase of immovable property : from Rs. 5 lakh to Rs. 10 lakh

2. In the case of hotel or restaurant bills paid at any one time : from Rs. 25,000 to Rs.50,000

3. For purchase or sale of shares of an unlisted company : from Rs. 50,000 to Rs. 1 lakh.

In keeping with the Government’s thrust on financial inclusion, opening of a no-frills bank account such as a Jan Dhan Account will not require PAN.

Other than that, the requirement of PAN applies to opening of all bank accounts including in co-operative banks.

The changes to the Rules will take effect from 1st January, 2016.

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