The Buyt Desk
Indian citizens need to follow the income tax rules of quoting PAN in 18 kinds of transactions or reporting it in Form 60 in absence of PAN else it attracts a penalty.
To fight two evils that are black money and citizens not paying taxes, the government of India has come up with mandatory quoting of PAN for certain monetary limits. Stopping the circulation of black money is very important for India and so is widening the tax base. A permanent Account Number (PAN) is the most important document for taxpayers of the country. A ten-digit unique alphanumeric number, PAN issued by the Income Tax Department helps the tax department to track all big transactions of PAN holders. Transactions such as TDS/TCS credits, tax payments, specified transactions, returns of income, correspondence etc can be tracked. PAN card holders’ financial information can be easily retrieved by the income tax department and tax evasion can be detected. To control tax evasion and suspicious transactions, quoting of PAN is mandatory for some transactions.
What are the financial transactions that require quoting of PAN?
As per rule 114B of the Income Tax Act, quoting of PAN is mandatory for some transactions done by individuals. Below are 18 such transactions listed in the Income Tax Act.
1. Sale or purchase of any vehicle other than two-wheelers.
2. Applying for opening an account with a cooperative bank or a banking company.
3. Applying for an issue of a credit or debit card.
4. Applying for the opening of a Demat account with a participant, depository, custodian of securities or any other person with SEBI.
5. Single payment exceeding Rs. 50,000 made in cash to a hotel or restaurant against a bill.
6. Single payment exceeding Rs. 50,000 made in cash towards travel to any foreign country or purchase of any foreign currency.
7. Payment exceeding Rs. 50,000 made to purchase units of a Mutual Fund.
8. Payment exceeding Rs. 50,000 made to purchase debentures or bonds issued by a company or an institution.
9. Payment exceeding Rs. 50,000 made to purchase bonds issued by the Reserve Bank of India.
10. Deposit exceeding Rs. 50,000 in a single day with a banking company or a co-operative bank.
11. Single-day payment in cash exceeding Rs. 50,000 towards a banking company or a co-operative bank, made to purchase pay orders or banker’s cheques or bank drafts.
12. A time deposit exceeding Rs. 50,000 at one time or Rs. 5 lakh during a financial year with a Post Office, a banking company, a co-operative bank, a non-banking financial company or a Nidhi referred to in section 406 of the Companies Act, 2013.
13. Total payment of Rs. 50,000 in a financial year made in cash or a bank draft or pay order or banker’s cheque towards one or more pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 to a banking company, a co-operative bank or any other company or institution.
14. Total payment of more than Rs. 50,000 in a financial year towards the life insurance premium.
15. Single payment exceeding Rs. 1 lakh towards sale or purchase of securities (other than shares).
16. Single payment exceeding Rs. 1 lakh towards the sale or purchase of shares of a company not listed in the recognized stock exchange by any person.
17. Payment exceeding Rs. 10 lakh towards sale or purchase of any immovable property or valued by stamp valuation authority as section 50C of the Act exceeding Rs. 10 lakh.
18. Payment exceeding Rs. 10 lakh per transaction towards sale or purchase of goods or services of any nature excluding the ones specified above.
Also please note quoting of PAN is not necessary by a non-resident in a transaction referred at points No. 3, 5, 6, 9, 11, 13 and 18. These rules of quoting PAN are not applicable to the Central Government, the State Governments and the Consular Offices. Also, minors can quote the PAN of their parents or guardians if they do not have any income chargeable to income tax. Individuals not having PAN but doing transactions listed above, must make a declaration in Form No. 60. Doing so will not attract notice or enquiry from the Income Tax Department.
How does the Income Tax Department ensure that PAN is quoted on transactions in which quoting of PAN is mandatory?
As per the income tax department, a person receiving documents related to economic or financial transactions notified by the Central Board of Direct Taxes is responsible for ensuring the PAN is quoted where it is mandatory. It is the whole and sole responsibility of the receiver of these documents.
Penalty for breaching the rule
Section 272B of Income Tax defines the penalty for contravention of quoting the PAN rules. The assessing officer imposes the penalty after giving the person an opportunity to be heard
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A penalty of Rs. 10,000 imposed on a person who is required to collect PAN but is unable to do so.
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A penalty of Rs. 10,000 imposed on a person who is required to quote his / her PAN but fails to do so.
