PAN, or permanent account number, is a unique 10-digit alphanumeric identity by the Income Tax Department, under the aegis of Central Board of Direct Taxes. It is mandatory that every individual who falls in the tax slab should have a PAN card. This document also doubles up as an identity proof. It is essential for taxable salary, professional fees, purchasing mutual funds, assets above specified limits, and other monetary transactions.
Changes in PAN Card Transactions
The government of India had introduced certain changes in the PAN card transactions. These changes are applicable during different financial transactions, above Rs 2 lakh and is effective from January 01, 2016. Here are the objectives due to which changes have been introduced:
- Curb black money flow
Illegal transactions and corruption leads to accumulation of black money, which slows down the economy. By asking people to submit PAN for transactions above Rs 50,000, the government intends to curb illegal ways and reduce the flow of black money.
- Widen taxpayer base
It is really surprising to notice that presently only 14% of the population in India holds a PAN card. 3.6 crore people (i.e. only 2.8%) file income tax returns out of 117 crore. By asking for PAN cards, the Government can not only enhance the taxpayer base but also monitor high value transactions.
The main objective of PAN is to use it as a universal identification key to track financial transactions having a taxable component to prevent tax evasion. As per the government regulations, PAN details should be furnished for transactions above Rs 2 lakh, irrespective of the payment method. Individuals who don’t own a PAN and have transactions exceeding Rs 2 lakh should fill a form and provide the required identity proof.
Commencing from Jan 01, 2016, the PAN card has to be furnished during the following transactions:
- Immovable property – Purchase and sales of immovable property exceeding Rs 10 lakh requires a PAN card. The previous limit was Rs 5 lakh, which has now been increased to Rs 10 lakh.. Any of the properties that is valued by Stamp Valuation authority and exceeds Rs 10 lakh needs PAN card during transaction.
- Motor vehicle – When purchasing a four wheeler, the individual will have to produce a PAN card. A person selling his four-wheeler is also required to show his PAN for the transaction. However, PAN is not needed for the sale or purchase of two-wheelers.
- Fixed Deposit – Fixed deposits with any bank that are more than Rs 50,000 or Rs 5 lakh in a year are supposed to be backed with a PAN card. This rule also applies for term deposits with non-banking financial corporations (NBFCs) and Post Offices
- Opening an account – When opening an account with any of the banks, be it nationalized or co-operative, an individual has to produce his PAN as one of the documents for identification. Only accounts in Pradhan Mantri Dhan Yojana are exempted from producing the PAN.
- Life insurance premiums – Life insurance premiums may vary on the plan and premium amount, as preferred by the policyholder. Premiums may be as low as Rs 100 or high as Rs 1 lakh, depending on the insurance provider. However, in any year if the premium tends to exceed Rs 50,000, as per the new rule the policyholder will have to mention details of his PAN card.
- Cash Card – Payments made using cash cards also require PAN details. While making cash transactions through any prepaid payment instruments such as gift cards,social benefit cards or remittance cards, exceeding Rs Rs. 50,000 in a year PAN card number should be mentioned.
- Foreign travel – Quoting PAN card is mandatory for cash payments in connection with foreign travel or purchasing foreign currency of value more than Rs 50,000.
- Hotel Bill – One time bill payment of Rs 50,000 or more in cash, in any restaurant or hotel requires the payer to quote his PAN details.
- Cash purchase of bank drafts – You need to mention PAN card if you are doing cash purchase of bank drafts/ pay orders or banker’s cheques exceeding Rs 50,000 on any day.
- Cash Deposit – Quoting PAN is essential while making transaction or cash deposits worth Rs 50,000 or more in a single day in any bank account.
- Credit Card – It is mandatory to quote PAN card number while applying for credit card at any bank or financial institution.
- Purchase of bullion or jewellery – With effect from January 01, 2016, the finance ministry announced that purchase of gold jewellery or bullion worth Rs 2 lakh or more in cash or through card, furnishing PAN is a must.
- Mutual fund or Bond Purchase – PAN has to be mentioned if bonds or mutual funds exceed the purchase value of Rs 50,000.
- Company shares – Opening DEMAT accounts, used for purchasing shares in a company, in banks has PAN as one of the mandatory documents. Hence an individual who wishes to purchase stocks in an unlisted company or open a DEMAT account of more than Rs 1 lakh should furnish his permanent account number.
Quoting the PAN card number is mandatory under Rule 114B of the Income Tax Department. These changes have been introduced by the Government in order to reduce black money movement and increase tax payer base in the country.
