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Analysis of PAN card requirement w.e.

f 01
Jan 2016
Overview
Section 139A(5) of Income-tax Act, 1961 provides that every taxpayer shall mandatorily
quote its PAN in all documents pertaining to certain transactions (PAN reportable
transactions) as prescribed by CBDT. Default thereof attracts penalty of INR 10,000 on each
occasion. If the taxpayer does not possess PAN, it may furnish a declaration in Form 60
givingdetails of the transactions and other prescribed details.
Recommendations of the Special Investigation Team 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 R1 lakh. The recommendation was also accepted by the Finance Minister in
his Budget Speech of 2015.
CBDT, vide Press Release announced that in order to bring a balance between burden of
compliance on legitimate transactions and the need to capture information relating to
transactions of higher value, quoting of PAN shall be made compulsory for all sales and
purchases of goods and services where payment exceeds INR 2 lakhs and monetary limitsof
other PAN reportable transactions shall also be revised.
Homeknow your panHIGH VALUE TRANSACTION
Analysis of PAN card requirement w.e.f 01 Jan 2016
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Overview
Section 139A(5) of Income-tax Act, 1961 provides that every taxpayer shall
mandatorily quote its PAN in all documents pertaining to certain transactions
(PAN reportable transactions) as prescribed by CBDT. Default thereof attracts
penalty of INR 10,000 on each occasion. If the taxpayer does not possess PAN, it
may furnish a declaration in Form 60 givingdetails of the transactions and other
prescribed details.
Recommendations of the Special Investigation Team 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 R1 lakh. The recommendation was also
accepted by the Finance Minister in his Budget Speech of 2015.
CBDT, vide Press Release announced that in order to bring a balance between
burden of compliance on legitimate transactions and the need to capture
information relating to transactions of higher value, quoting of PAN shall be made
compulsory for all sales and purchases of goods and services where payment

exceeds INR 2 lakhs and monetary limitsof other PAN reportable transactions
shall also be revised.
Pursuant thereto, CBDT has recently notified the substitution of the existing
Income-tax Rules regarding mandatory quoting of Permanent Account Number
(PAN) vide Notification No. 95/2015 dated 30-12-2015. The substituted rules
specify transactions pertaining to which every person shall be required to quote
his PAN number. The Central Government, the State Governments and the
Consular Offices have been excluded from the purview of the new rules.
Exceptions have been made for non-residents with respect to certain
transactions. The amended rules for mandatory quoting of PAN have been made
effective 1st January 2016.
As an overview, the new Rules primarily provide for the following:
a) List of PAN reportable and monetary threshold for such reporting
transactions (Rule 114B)
b) List of specified persons responsible to ensure PAN is duly quoted or in
absence of PAN, a declaration in Form 60 with complete details is
furnished (Rule 114C)
c) Mode and manner of furnishing by certain specified persons of half
yearly statements containing particulars of declarations received in Form
60 (Rule 114D);
d) Further, the new Rules have also modified AIR furnishing requirements
connected with PAN reportable transactions with effect from 1 April 2016.
(Rule 114E)
Know your PAN Structure
Before we proceed to analyse & discuss the new provisions. Lets discuss the
structure & Digits of PAN:
PAN is having 10 characters consist of digits as well as alphabets. Structure of
PAN is given below:
AAACS1234A
First 3 Alphabets (AAA) and last 4 digits (1234): This is running series which
prevents allotment of more than one PAN to assessee with same name.
Fourth character: This represents the type of assessee. Such as C for
Company. Below is the meaning of 4th Digit of PAN
C: Company
P: Person
H: HUF
F: Firm
A: AOP
T: Trust
B: BOI
L: Local authority
J: Artificial juridicial person
G: Govt
Fifth digit: This represents the first character of assessee surname/last name.
Analysis of Changes introduced w.e.f 01 Jan 2016
The changes made by way of the Notification vis-vis the erstwhile provisions
have been tabulated below:
A chart highlighting the key changes to Rule 114B of the Income-tax Act is attached.
Sl.
NATURE OF
MANDATORY QUOTING OF PAN (RULE 114B)
TRANSACTION
Existing requirement
New requirement
1.
Immovable property Sale/ purchase valued at Rs.5
Sale/ purchase exceeding Rs.10 lakh;
lakh or more
ii. Properties valued by Stamp Valuation
authority at amount exceeding Rs.10
lakh will also need PAN.
2
Motor vehicle (other
All sales/purchases
No change

Sl.

3.

4.
5.
6.

7.

8.
9.

NATURE OF
TRANSACTION
than two wheeler)
Time deposit

Deposit with Post


Office Savings Bank
Sale or purchase of
securities
Opening an account
(other than time
deposit)
with
a
banking company.
Installation
of
telephone/
cellphone
connections
Hotel/restaurant
bill(s)

11.

Cash purchase of
bank drafts/ pay
orders/
banker's
cheques
Cash deposit with
banking company
Foreign travel

12.

Credit card

13.

Mutual fund units

14.

Shares of company

15.

Debentures/ bonds

16.

RBI bonds

17.

Life
insurance
premium

18.

Purchase
of
jewellery/bullion
Purchases or sales
of goods or services

10.

19.
20.

Cash cards/ prepaid


instruments issued
under Payment &
Settlement Act

MANDATORY QUOTING OF PAN (RULE 114B)


Existing requirement
New requirement
Time
deposit
Rs.50,000/- with
company

exceedingi.
banking

Exceeding Rs.50,000/-

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
Discontinued

Contract for sale/purchase of a


value exceeding Rs.1 lakh
All new accounts.

All instances

No change

i. Basic Savings Bank Deposit Account


excluded (no PAN requirement for
opening these accounts);
ii. Co-operative banks also to comply
Discontinued

Exceeding Rs.25,000/- at any


one time (by any mode of
payment)
Amount
aggregating
to
Rs.50,000/- or more during any
one day

Cash payment exceeding Rs.50,000/-.

Cash aggregating to Rs.50,000/or more during any one day


Cash 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)
Application to banking company/
any other company/institution for
credit card
Payment of Rs.50,000/- or more
for purchase

Cash deposit exceeding Rs.50,000/- in


a day.
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)

Exceeding Rs.50,000/- on any one day.

No change.
Co-operative banks also to comply.
Payment exceeding Rs.50,000/- for
purchase.

Payment of Rs.50,000/- or morei.


Opening a demat account;
to a company for acquiring itsii. Purchase or sale of shares of an
shares
unlisted company for an amount
exceeding Rs.1 lakh per transaction.
Payment of Rs.50,000/- or more Payment exceeding Rs.50,000/-.
to a company/ institution for
acquiring its debentures/ bonds
Payment of Rs.50,000/-or more Payment exceeding Rs.50,000/-.
to RBI for acquiring its bonds
Payment of Rs.50,000/- or more Payment exceeding Rs.50,000/- in a
in a year as premium to an year.
insurer
Payment of Rs.5 lakh or more at Deleted and merged with next item in
any one time or against a bill
this table
No requirement
Purchase/ sale of any goods or
services exceeding Rs.2 lakh per
transaction.
No requirement
Cash payment aggregating to more
than Rs.50,000 in a year.

Important Notes:

1. In case minor is entering into the specified transactions and who does not
have income chargeable to Income tax, he shall quote PAN number of his
father/mother/guardian.
2. PAN to be quoted in all the documents pertaining to specified transactions
3. Any person who does not have a permanent account number and who enters
into any transaction specified, he shall make a declaration in Form No.60 giving
therein the particulars of such transaction.
4. payment in connection with travel includes payment towards fare, or to a
travel agent or a tour operator, or to an authorised person as defined in clause
(c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);
5. Travel agent or tour operator includes a person who makes arrangements for
air, surface or maritime travel or provides services relating to accommodation,
tours, entertainment, passport, visa, foreign exchange, travel related insurance
or other travel related services either severally or in package;
6. Time deposit means any deposit which is repayable on the expiry of a fixed
period.
As per RBI Guidelines, It is Important to note that an authorised Dealers may
accept payment in cash for amounts which do not exceed the amount equivalent
to R50,000/- (Rupees fifty thousand only) against sale of foreign exchange for
travel abroad (for private visit or for any other purpose). Wherever the sale of
foreign exchange exceeds the amount equivalent to R50,000, the payment must
be received only by:
(i) a crossed cheque drawn on the applicants bank account, or
(ii) a crossed cheque drawn on the bank account of the firm/company
sponsoring the visit of the applicant, or Bankers Cheque/Pay Order/
Demand Draft or
(iii) Debit/Credit/pre-paid cards provided
Reporting Requirements
(A) Rule 114D of Income tax rules Reporting of Declarations received through
Form-60
1. Statement in form No. 61 containing particulars of form 60 to the Director of
Income-tax (Intelligence and Criminal Investigation) or the Joint Director of
Income-tax (Intelligence and Criminal Investigation) through online transmission
of electronic data to a server designated for this purpose and obtain an
acknowledgement number
2. Retain Form No. 60 for a period of six years from the end of the financial year
in which the transaction was undertaken.
Periodicity of Reporting
Declaration
Due date
received for the
period
Jan to Sep
31st Oct of that year
Oct to Mar
30th April of the financial year immediately
following the financial year in which form 60
is received.
(B) Rule 114E of Income tax rules: Requirement to furnish details of the specified
financial transactions by way of an Annual Information Statement vide
Notification 95/2015, dated December 30, 2015, CBDT has modified the rules
(i.e. Rule 114E w.r.t. 285BA) related to Filing of AIR. Now the AIR return will be
called as Statement of Financial Transaction (SFT), the statement of financial
transaction required to be furnished under subsection (1) of section 285BA of the

Act shall be furnished in respect of a financial year in Form No. 61A and shall be
verified in the manner indicated therein.
These rules will be effective for the transactions entered on or after April 1, 2016.
Gist of these transactions and respective specified person can be described as
follows:

E-filing of AIR (SFT)


Furnishing of AIR continues to be in electronic mode subject to variation that in
case of persons other than Post Master General and Registrar/Inspector General,
the data needs to be transmitted online to Tax Authoritys server instead of
physical furnishing of floppy/CD/DVD.
Periodicity of furnishing AIR (SFT)
The return in Form No. 61A shall be furnished to the Director of Income-tax
(Intelligence and Criminal Investigation) or the Joint Director of Incometax
(Intelligence and Criminal Investigation) on or before the 31st May, immediately
following the financial year in which the transaction is registered or recorded.
W.e.f. April 1, 2016 all companies will be required to collect the details to file the
return in Form No: 61A if they entered in any transaction as mentioned above.
Penalty Provisions
1) Penalty for non-quoting of PAN (Section 272B) If a person fails to comply with
the requirement of quoting the PAN or furnish incorrect PAN then Assessing
Officer may levy the penalty of R10,000.
2) Penalty for non-furnishing of statement If a person fails to comply with the
requirement of furnishing the specified statement, penalty will be of R100 per
day of default. However, if he assessee receives any notice from the department
for filing the statement then it shall be filed within limit of 30 days from the date
of service of notice. In case of such default, the penalty shall be levied of R500
per day of default.
3) Section 277 of the Income Tax Act - False statement in verification, etc. If a
person makes a statement in any verification under this Act or under any rule
made thereunder, or delivers an account or statement which is false, and which
he either knows or believes to be false, or does not believe to be true, he shall be
punishable,(i) in a case where the amount of tax, which would have been evaded if the
statement or account had been accepted as true, exceeds one hundred thousand
rupees, with rigorous imprisonment for a term which shall not be less than six
months but which may extend to seven years and with fine;
(ii) in any other case, with rigorous imprisonment for a term which shall not be
less than three months but which may extend to three years and with fine.
Conclusion:

The above notification shall have huge impact on the business transactions.
Quoting PAN will help create an audit trail of all high-value transactions by one
particular individual and help the tax department determine if it is in line with
the declared income of that person. This will help the government widen its tax
base, curb the circulation of black money and move towards a cashless economy.
Taxpayers need to note that PAN reporting compliance on new reportable
transactions has already triggered since 1 January 2016 and hence needs
immediate implementation to avoid penalty consequences. There would be
transitional difficulties especially for large corporates where changes in software
would be required to implement the changes.
List of references
1. Press release, Govt. of India, Ministry of Finance, dated 15/12/2015
2. Notification No. 95/2015, dated 30/12/2015
3. Rule 114B, C, D & E of Income Tax Rules.

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