Quoting the permanent account number (PAN) will be mandatory from 1 January for cash payment made to settle hotels bills or for buying air tickets for foreign travel of Rs50,000 or above as the government tightened disclosure norms to check generation of domestic black money.
The PAN requirement for non-luxury cash transactions will be Rs2 lakh. However, in a relief to small investors, the requirement of furnishing PAN for making post office deposit of over Rs50,000 has been dispensed with.
PAN will also be mandatory on purchase of immovable property of Rs10 lakh. This will be a relief to small home buyers as previously the government had proposed to make PAN quoting mandatory for purchase or sale of Rs5 lakh.
Unveiling the new norms, revenue secretary Hasmukh Adhia said purchasing of jewellery or bullion, a major source of black money, quoting of PAN would be required if the sum involved is Rs2 lakh per transaction. Currently, it is required for transaction of Rs5 lakh and above.
PAN would also be mandatory for cash payments of more than Rs50,000 for cash cards or prepaid instruments as well as for acquiring shares of unlisted companies for Rs1 lakh and above. It has also been mandatory for opening all bank accounts except Pradhan Mantri Jan Dhan Yojana accounts, he said. The relief also includes discontinuation of requirement of PAN for installation of basic landline or cellphone connection.
In Lok Sabha, finance minister Arun Jaitley said that the government will soon issue a notification making quoting of PAN mandatory for all cash and card transactions beyond Rs2 lakh. The limit is double of Rs1 lakh that he had proposed in his Budget for 2015-16. “An issue is being raised with regard to black money… Very shortly we will be placing the notification that if you deal in cash of more than Rs2 lakh, a PAN number would be necessary,” he said replying to debate in the Lok Sabha on Supplementary Demands for Grants.
Adhia said a distinction has been made in case of hotel and foreign travel bills of Rs50,000 as they are luxury spending. All other cash transactions would attract the PAN requirement if they are above Rs2 lakh.
The Rs2 lakh limit for disclosure of PAN card is an “interim measure” and ultimate goal is to lower it Rs1 lakh, Adhia said.
To bring balance between burden of compliance on legitimate transactions and the need to capture information relating to high value transaction, he said, the money limits have now been raised to Rs10 lakh from Rs5 lakh for sale or purchase of immovable property, to Rs50,000 from Rs25,000 in the case of hotel or restaurant bills paid at any one time, and to Rs1 lakh from Rs50,000 for purchase or sale of shares of an unlisted company.
The changes will take effect from 1 January 2016.
Adhia said all other regulation for quoting of PAN like making cash deposit of more than Rs50,000 or purchase of bank draft/pay orders/bankers cheque of equal denomination on a single day, payment of life insurance premium of Rs50,000 on a year will continue as previously. There has been a relaxation in case of immovable property as previously it was proposed to make PAN mandatory for purchase or sale of Rs5 lakh.
In keeping with the government’s thrust on financial inclusion, opening of a no-frills bank account such as a Jan Dhan account will not require PAN. Other than that, the requirement of PAN applies to opening of all bank accounts, including in cooperative banks.
“The government is committed to curbing the circulation of black money and widening of tax base,” Adhia said. “To collect information on certain types of transactions from third parties in a non-intrusive manner, the Income-Tax Rules require quoting of PAN where the transactions exceed a specified limit.”
Supreme Court-appointed Special Investigation Team (SIT) on black money had recommended that quoting of PAN should be made mandatory for all sales and purchase of goods and services where the payment exceeds Rs1 lakh. This was also reflected in Jaitley’s budget speech on 28 February. “The government has since received numerous representations from various quarters regarding the burden of compliance this proposal would entail. Considering the representations, it has been decided that quoting of PAN will be required for transactions of an amount exceeding Rs2 lakh regardless of the mode of payment,” he said.
The changes in the rules, he said, are expected to be useful in widening tax net by non-intrusive methods. “They are also expected to help in curbing black money and move towards a cashless economy.”