In this article we shall discuss the various types of financial transactions where it is mandatory to disclose the PAN.
Financial Transactions Where Quoting Of PAN Is Required
Permanent Account Number or PAN serves as an important tool for estimating the total tax revenue generated in the country. Apart from that PAN is also one of the ID proofs for many financial transactions, including tax payments, TDS/TCS credits, returns of income, specified transactions, correspondence etc, and so on.
There are certain transactions, identified either on the basis of their nature, volume or value, where you have to disclose the details of your PAN in order to give the transaction legitimacy. Failure to collect PAN details for such transactions will be considered illegal as per the law and can lead to punitive action.
Types of Financial Transactions
As per Rule 114B of the Income Tax Rules, the following are the transactions in which quoting of PAN is mandatory by every person except the Central Government, the State Governments and the Consular Offices:
- Sale or purchase of a motor vehicle or vehicle as defined in the Motor Vehicles Act, 1988 other than two-wheeled vehicles.
- Opening an account [other than a time-deposit referred at point No. 12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank
- Making an application to any banking institution for the issue of a credit or debit card.
- Opening of a demat account with a depository, participant, custodian of securities or any other person registered under SEBI (Securities and Exchange Board of India). A demat account is an account that is used to hold shares and securities in electronic format.
- Payment in cash of an amount exceeding Rs. 50,000 to a hotel or restaurant against the bill at any one time.
- Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country or payment for the purchase of any foreign currency at any one time.
- Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its units. A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature.
- Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring debentures or bonds issued by it. Debentures are issued by private/public companies for raising capital from investors. Bonds are backed by the assets of the issuer whereas debentures are not secured by any of the physical assets or collateral.
- Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds issued by it.
- Deposits of cash exceeding Rs. 50,000 during any one day with a banking company or a cooperative bank. Moreover, even the deposits of cash aggregating to more than Rs. 2,50,000 during the period of 09th November 2016 to 30th December 2016 with a banking company, cooperative bank or post office.
- Payment in cash for an amount exceeding Rs. 50,000 during any one day for the purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank.
- A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with – (i) a banking company or a co-operative bank (ii) a Post Office; (iii) a Nidhi referred to in section 406 of the Companies Act, 2013 or (iv) a non-banking financial company
- Payment in cash or by way of a bank draft or pay order or banker’s cheque of an amount aggregating to more than Rs. 50,000 in a financial year for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of 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 or a co-operative bank or to any other company or institution. [As amended by Finance (No. 2) Act, 2019]
- Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer
- A contract for sale or purchase of securities (other than shares) for an amount exceeding Rs. 1 lakh per transaction
- Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange for an amount exceeding Rs. 1 lakh per transaction.
- Sale or purchase of any immovable property for an amount exceeding Rs. 10 lakh or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
- Sale or purchase of goods or services of any nature other than those specified above for an amount exceeding Rs. 2 lakh per transaction.
Additionally, the following also must be noted:
- A minor person can quote PAN of his father or mother or guardian provided he does not have any income chargeable to income-tax.
- Any person, who does not have PAN and enters into any of the above transaction, can make a declaration in Form No.60.
- Quoting of PAN is not required by a non-resident in a transaction referred at point 4 or 7 or 8 or 10 or 12 or 14 or 15 or 16 or 17
- Any person who has an account (other than a time deposit referred at point no. 12 and a Basic Saving Bank Deposit Account) maintained with a banking company or a co-operative bank. He will be required to furnish his PAN or Form No.60 on or before 30-06-2017 if he has not quoted his PAN or furnished Form No. 60 at the time of opening of such account or subsequently.
Filing Form 60
Any person who does not have a PAN and wants to make any of the above-listed 18 transactions where quoting of PAN is required, can file declaration Form 60 as per the Rule 144B of the Income Tax Act, 1962. Form 60 is filed in place of PAN. Form 60 can be filed either manually or electronically in accordance with the standards specified by the Principal Director-General of Income Tax.
What Happens if False Information Is Produced on Form 60?
Before signing the declaration, the declarant should satisfy himself that the information furnished in this form is true, correct and complete in all respects.
Any person making a false statement in the declaration shall be liable to prosecution under section 277 of the Income-tax Act, 1961 and on conviction be punishable:
- in a case where tax sought to be evaded exceeds Rs 25 lakhs, with rigorous imprisonment, not less than 6 months and may extend up to 7 years with fine;
- in any other case, with rigorous imprisonment not less than 3 months and may extend to 2 years and with a fine.
Electronic Verification of Form 60:
For applicants filing Form 60 online the following electronic verifications are applicable:
- Authentication using One-Time-Password (OTP) to the applicant’s registered mobile number
- Authentication using biometric – fingerprints or iris
- Authentication using OTP and fingerprints
- Authentication using OTP, fingerprints and iris.
Conclusion
The list is exhaustive because there have been a lot of instances of money laundering and illegal funds being used. When the PAN details are mentioned and Form 60 is fined, the government can verify if that particular transaction has been assessed for income tax purposes or not. If you have any other queries or have any requirements with regards to any legal or regulatory matter, get in touch with us and our team of experts will help you out with your requirements.
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