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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