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New Rules regarding quoting of PAN for specified transactions

New Rules regarding quoting of PAN for specified transactions amended, Ministry of Finance Specified New 20 Rules for quoting of PAN for specified transactions. The Government is committed to curbing the circulation of black money and widening of tax base. To collect information of certain types of transactions from third parties in a non-intrusive manner, the Income-tax Rules require quoting of Permanent Account Number (PAN) where the transactions exceed a specified limit. Persons who do not hold PAN are required to fill a form and furnish any one of the specified documents to establish their identity.

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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.

To bring a balance between burden of compliance on legitimate transactions and the need to capture information relating to transactions of higher value, the Government has also enhanced the monetary limits of certain transactions which require quoting of PAN. The monetary limits have now been raised to Rs. 10 lakh from Rs. 5 lakh for sale or purchase of immovable property, to Rs.50,000 from Rs. 25,000 in the case of hotel or restaurant bills paid at any one time, and to Rs. 1 lakh from Rs. 50,000 for purchase or sale of shares of an unlisted company. 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.

The above changes in the rules are expected to be useful in widening the tax net by non-intrusive methods. They are also expected to help in curbing black money and move towards a cashless economy.

A chart highlighting the key changes to Rule 114B of the Income-tax Act is attached.


Sl.
NATURE OF TRANSACTIONMANDATORY QUOTING OF PAN (RULE 114B)
Existing requirementNew requirement
1.Immovable propertySale/ purchase valued at Rs.5  lakh or morei.       Sale/ purchase exceeding Rs.10 lakh;

ii.     Properties valued by Stamp Valuation authority at amount exceeding Rs.10 lakh will also need PAN.

2Motor vehicle (other than two wheeler)All sales/purchasesNo change
3.Time depositTime deposit exceeding Rs.50,000/- with a banking companyi.      Deposits with Co-op banks, Post Office, Nidhi, NBFC companies will also need PAN;

ii.    Deposits aggregating to more than Rs.5 lakh   during the year will also need PAN

4.Deposit with Post Office Savings BankExceeding Rs.50,000/-Discontinued
5.Sale or purchase of securitiesContract for sale/purchase of a value exceeding Rs.1 lakhNo change
6.Opening an account (other than time deposit) with a banking company.All new accounts.i. Basic Savings Bank Deposit Account excluded (no PAN requirement for opening these accounts);

ii. Co-operative banks also to comply

7.Installation of telephone/ cellphone connectionsAll instancesDiscontinued
8.Hotel/restaurant bill(s)Exceeding Rs.25,000/- at any one time (by any mode of payment)Cash payment exceeding Rs.50,000/-.
9.Cash purchase of bank drafts/ pay orders/ banker’s chequesAmount aggregating to Rs.50,000/- or more during any one dayExceeding Rs.50,000/- on any one day.
10.Cash deposit with banking companyCash aggregating to Rs.50,000/- or more during any one dayCash deposit exceeding Rs.50,000/- in a day.
11.Foreign travelCash payment in connection with foreign travel  of an amount exceeding Rs.25,000/- at any one time (including fare, payment to travel agent, purchase of forex)Cash payment in connection with foreign travel or purchase of foreign currency of an amount exceeding Rs.50,000/- at any one time (including fare, payment to travel agent)
12.Credit cardApplication to banking company/ any other company/institution for credit cardNo change.

Co-operative banks also to comply.

13.Mutual fund unitsPayment of Rs.50,000/- or more for purchasePayment exceeding Rs.50,000/- for purchase.
14.Shares of companyPayment of Rs.50,000/-  or more to a company for acquiring its sharesi.      Opening a demat account;

ii.    Purchase or sale of shares of an unlisted company for an amount exceeding Rs.1 lakh per transaction.

15.Debentures/ bondsPayment of Rs.50,000/- or more to a company/ institution for acquiring its debentures/ bondsPayment exceeding Rs.50,000/-.
16.RBI bondsPayment of Rs.50,000/-or more to RBI for acquiring its bondsPayment exceeding Rs.50,000/-.
17.Life insurance premiumPayment of Rs.50,000/- or more in a year as premium  to an insurerPayment exceeding Rs.50,000/- in a year.
18.Purchase of jewellery/bullionPayment of Rs.5 lakh or more at any one time or against a billDeleted and merged with next item in this table
19.Purchases or sales of goods or servicesNo requirementPurchase/ sale of any goods or services exceeding Rs.2 lakh per transaction.
20.Cash cards/ prepaid instruments issued under Payment & Settlement ActNo requirementCash payment aggregating to more than Rs.50,000 in a year.

 

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