A Permanent Account Number or PAN is a unique 10-digit alphanumeric code used by the Income Tax Department to identify individuals who are earning. PAN is mandatory for anyone who falls under the tax slab. For certain transactions, PAN card was made compulsory by the Government of India.
PAN Card Requirements 2016
The Government of India introduced changes in PAN requirements in December 2015 which came into effect from 1st January 2016. For various financial transactions, PAN was made essential in order to curb the flow of black money and widen the taxpayer base. PAN was made mandatory under Rule 114B for the following transactions:
- Purchase and sale of immovable property exceeding Rs 10 lakhs. This was previously Rs.5 lakhs.
- Purchase and sale of four wheelers.
- Life Insurance Premiums exceeding Rs.50,000 per year
- Fixed deposits held at any bank exceeding Rs 50,000 or Rs 5 lakh in a year .
- Opening an account with any bank except Pradhan Mantri Dhan Yojana accounts.
- Cash payments related to foreign travel and currency exchange exceeding Rs.50,000.
- One-time hotel bill payments of Rs.50,000 or more paid with cash.
- Cash purchase of bank drafts, pay orders or banker’s cheques above Rs.50,000 per day.
- Cash deposit in any bank account of Rs.50,000 or more in a single day.
- Applying for a credit card.
- Purchase of bonds or mutual funds above Rs.50,000.
- Opening demat accounts.
- Purchase of gold jewellery or bullion worth Rs.2 lakh or more by cash or card.
PAN Card Requirements for Gold Purchase 2016
Furnishing PAN card details for gold purchase was made mandatory by the Government of India for transactions valued at Rs.2 lakhs and above. The rule impacted the organised jewellery trade affecting more than 50% of business in terms of value. Prior to 1st January 2016, PAN details were required only for purchase of Rs.5 lakhs and above. Jewellers complained that customers who did not have a PAN card faced hardships in purchasing gold. Along with people who did not have PAN cards, those who did want to share PAN details sought out unorganised retailers to buy jewellery without bills. Important things to note regarding PAN details for gold purchase are as follows:
- If you are buying gold worth Rs.2 lakhs and above, you need to provide your Permanent Account Number.
- PAN will be traded as the buyer’s identity.
- Sellers must collect tax at source on such sales which will be different from Tax Deducted at Source.
- The tax rate is specified and must be collected and deposited with the Government.
- Furnishing PAN details does not mean you have to pay tax. It is merely a means of establishing financial identity.
PAN Card Requirements for Gold Purchase 2017
At present, PAN card requirements set in 2016 will carry forth into 2017. Customers will be required to furnish their PAN details for gold purchases of Rs.2 lakh and above if purchased in cash.
Gold Purchases and Demonetisation
With the demonetisation of Rs.500 and Rs.1,000 notes coming into effect from 9th November 2016, customers retreated from gold purchases fearing scrutiny from the IT Department. On 8th November, after the announcement was made, there was a momentary gold rush as people sought out gold to dump their black money. But afterwards, jewellers and retailers saw empty stores at the peak of the wedding season. The demonetisation scheme was implemented to curb black money and counterfeit notes in circulation. To avoid PAN regulations, customers paid stores extra to divide the purchase into separate bills of smaller amounts not amounting to Rs.2 lakhs. The government brought jewellers under surveillance to ensure that no excessive gold sales were made with black money.
The demonetisation scheme caused a severe cash crunch in the Indian economy as ATMs and banks faced a shortage of new notes. Demand for gold slowly picked up but might take months to normalise.