Entering into any financial transaction – Are you required to disclose PAN?

Entering into any financial transaction – Are you required to disclose PAN?
By Shalini Jain 


One of the biggest agenda of the current Government is to curb black money menace in India and one of the step forward in this regard is the change made in the requirement of mandatory quoting of Permanent Account Number ('PAN") in designated financial transactions. 

The need for some pro-active measures to check the black money was highlighted by our Finance Minister in October 2015, wherein he had said "the bulk of black money is still within India. We thus need a change in national attitude where plastic currency becomes the norm and cash an exception". 

Pursuant to the recommendations made by the Special Investigation Team (SIT) on black money, the Finance Minister in his Budget Speech for 2015-16 had announced proposals to make it mandatory to quote PAN for all sale and purchase of goods and services where payment exceeds INR 1 lakh. However, on consideration of representation received from stakeholders and with a view to strike a balance between necessity of obtaining necessary information and avoiding onerous burden of compliance on legitimate transactions, the Central Board of Direct Taxes (CBDT) has decided to enhance the limit to INR 2 lacs and also to revise the monetary limits of other PAN reportable transactions. 

The CBDT vide a press release dated 15 December 2015 had announced the proposed changes to the rules of PAN reportable transactions. Subsequently, the relevant rules have been amended to bring about the changes in law. 

As discussed earlier, one of the key change pursuant to the amended rule is the requirement to quote PAN to new class of transaction viz. purchase or sale of goods or services exceeding INR 2 lakhs per transaction. The mode of payment by cash or cheque is not relevant which means whether one pays in cash or cheque, so long as the value of transaction is more than INR 2 lakhs, PAN is required to be reported. This new requirement has been made applicable with effect from 1 January 2016. 

The amended rule casts an obligation to quote PAN of both seller and buyer in all documents pertaining to sale or purchase, by any person, of goods or services of any nature (in addition to those already covered by erstwhile rule). 

The obligation to verify compliance of quoting of PAN of buyer and seller has been cast on person raising the bills and who has issued any document in relation to purchase or sale of goods or services. If the PAN of the buyer or seller is not available, such person has to furnish a declaration in Form 60 with complete particulars. Such form requires personal details of the individual and any false declaration of information in this form will make the individual liable for serious consequences. 

So next time one is shopping in a high end luxury store, the person has to be mindful of the fact that the purchase of an expensive bag or a fancy watch may come up with the onerous requirement to quote the PAN. 

In addition to this requirement, some of the other key changes/ changed limits for payments where PAN needs to be quoted are as under: 

* The limit for sale or purchase of immovable property has been increased from INR 5 lakhs to INR 10 lakhs 

The limit for single bill payment in cash to hotels and restaurants has been increased from INR 25,000 to INR 50,000 

* The limit for time deposits with banking companies has been increased from INR 50,000 to INR 5 lakhs 

From a compliance standpoint, these new rules will have a far greater impact than just curbing the black money which is definitely the Government's primary intent. With so much information on hand, it will lead to widening of tax base by tracking high value transactions. The Income tax department has also been picking up cases for scrutiny assessments under Computer Aided Scrutiny Selection ('CASS') basis the PAN of the individual and it is expected that there may be an increase in the audit of individuals entering high value transactions. By way of collection of information linked to PAN, the Income tax department will get an overview of the entire 'PAN life cycle summary' or to simply say transactions history of an individual in a chronological order, where a PAN has been quoted, in any part of the country, making it easier to link all the financial transactions of an individual in order to reduce tax evasion and curb black money. 

Quoting of PAN will prompt the use of banking transactions and use of plastic money shall rise significantly. This will strongly aid Government's agenda to curb black money. Our new resolution as law abiding citizens needs to be to support the Government in its positive measures. 

(The author is Executive Director - Tax & Regulatory Services, EY India. Views expressed are personal) 

Source : The Economic Times

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