Background:

In order to achieve a two-pronged target of curbing the circulation of black money and widening tax base, the government has recently notified changes in the monetary limits that will require mandatory quoting of PAN. The finance ministry has also rationalized the monetary limits for certain transactions requiring mandatory quoting of PAN. The monetary limit for sale or purchase of immovable property has been doubled to Rs.10,00,000, and that for hotel and restaurant bills to Rs. 50,000. “In dealing with domestic black money, transactions dealing with cash of more than Rs.2,00,000 will require submission of PAN details,” Finance Minister Shri Arun Jaitley told the Lok Sabha earlier this month while presenting his ministry’s supplementary demands for grants.

As per CBDT notification, PAN will be required for transactions above Rs. 2,00,000, regardless of the mode of payment.Any false declaration of PAN could also land an individual behind bars or a company liable to prosecution that includes a jail term of up to seven years and a fine.

Now there is a reporting requirement on the assessee entering into such transactions. We have given our views on the actions to be taken by such assessees in this regard.

A. Quoting of PAN(Permanent Account Number)[Rule 114B]

(Applicable w.e.f. 01 January 2016)

Every person shall quote his permanent account number (PAN) in all documents pertaining to the transactions specified in the Table below, namely:-

S.No.Nature of transactionsValue of transaction
1-Sale or purchase of a motor vehicle or vehicle, which requires registration by a registering authority under chapter VI of Motor Vehicles Act, 1988, OTHER THAN TWO WHEELERS,All Such Transactions
2-Opening an account with a Bank(Other than savings bank account),All Such Transactions
3-Application for Debit and Credit CardAll Such Transactions
4-Opening a demat accountAll Such Transactions
5-Payment to a hotel or restaurant against a billPayment of more than Rs. 50,000 (if in cash)
6-Payment in connection with foreign travel or payment for purchasing foreign currencyPayment of more than Rs. 50,000 (if in cash)
7-Payment to a company for purchasing debentures or bonds issued by itPayment exceeding Rs. 50,000
8-Payment to a Mutual Fund for purchase of its unitsPayment exceeding Rs. 50,000
9-Payment to RBI for acquiring bondsPayment exceeding Rs. 50,000
10-Deposit with a BankDeposit of more than Rs. 50,000 (if in cash) per day
11-Purchase of DD(Demand Drafts or banker’s cheques) from a BankPayment in cash for an amount more than Rs. 50,000 per day
12-Time deposit with a Bank, Post Office, Nidhi companies, NBFCsAmount of more than Rs. 50,000 per day or more than Rs. 5,00,000 during a financial year
13-Payment for prepaid instruments, issued by RBI to a banking companyPayment of more than Rs. 50,000 in a financial year
14-Payment for Life insurance premiumPayment exceeding Rs. 50,000 in a financial year
15-Sale or purchase of securities(other than shares)Amount exceeding Rs. 1,00,000 per transaction
16-Sale or purchase of unlisted sharesAmount exceeding Rs. 1,00,000 per transaction
17-Sale or purchase of any Immovable propertyAmount of more than Rs. 10,00,000 or if valued by stamp valuation authority, amount of more than Rs. 10,00,000
18-Sale or purchase of goods or services, other than those specified above, if anyAmount of more than Rs. 2,00,000 per transaction

Where a person, entering into any transaction referred above, is a minor and who does not have any income chargeable to income-tax, he shall quote the permanent account number (PAN) of his father or mother or guardian, as the case may be, in the document pertaining to the said transaction.

Further, where any person who does not have a PAN and who enters into any transaction specified above, he shall make a declaration in Form 60 giving therein the particulars of such transaction.

This rule shall not apply to following:

(i) the Central Government, the State Governments and the Consular Offices;

(ii) the Non-Residents referred to in clause (30) of section 2 of the Act in respect of the transactions referred to at Sl. No. 3 (Application for Debit and Credit Card) or 5 (Payment to a hotel or restaurant against a bill) or 6 (Payment in connection with foreign travel or payment for purchasing foreign currency) or 9(Payment to RBI for acquiring bonds) or 11(Purchase of DD(Demand Drafts or banker’s cheques) from a Bank), 13(Payment for prepaid instruments, issued by RBI to a banking company) or 18(Sale or purchase of goods or services exceeding Rs. 2L).

In other words, non-residents are required to either quoting his PAN or giving declaration in Form 60 for following transactions:

S.No.Nature of transactionsValue of transaction
1-Sale or purchase of a motor vehicle or vehicle, which requires registration by a registering authority under chapter VI of Motor Vehicles Act, 1988, OTHER THAN TWO WHEELERS,All Such Transactions
2-Opening an account with a Bank(Other than savings bank account),All Such Transactions
3-Opening a demat accountAll Such Transactions
4-Payment to a company for purchasing debentures or bonds issued by itPayment exceeding Rs. 50,000
5-Payment to a Mutual Fund for purchase of its unitsPayment exceeding Rs. 50,000
6-Deposit with a BankDeposit of more than Rs. 50,000 (if in cash) per day
7-Time deposit with a Bank, Post Office, Nidhi companies, NBFCsAmount of more than Rs. 50,000 per day or more than Rs. 5,00,000 during a financial year
8-Payment for Life insurance premiumPayment exceeding Rs. 50,000 in a financial year
9-Sale or purchase of securities(other than shares)Amount exceeding Rs. 1,00,000 per transaction
10-Sale or purchase of unlisted sharesAmount exceeding Rs. 1,00,000 per transaction
11-Sale or purchase of any Immovable propertyAmount of more than Rs. 10,00,000 or if valued by stamp valuation authority, amount of more than Rs. 10,00,000

Penalty for non-quoting of PAN (Section 272B) – If a person fails to comply with the requirement of quoting the PAN or furnish incorrect PAN then Assessing Officer may levy the penalty of Rs. 10,000.

B. Verification of PAN –[Rule 114C]

Any person who sells an immovable property exceeding Rs. 10L or motor vehicle of any value shall either obtain and verify the PAN of the buyer at the time of sale or shall obtain Form 60 in case buyer does not have PAN.

Any person, being a person raising bills referred to at S. No. 5 (hotel or restaurant) or 6 (foreign travel) or 18 (sale of goods or services exceeding Rs. 2,00,000) of rule 114B, who, in relation to a transaction specified in the said S. No., has issued any document shall ensure after verification that permanent account number has been correctly furnished and the same shall be mentioned in such document, or as the case may be, a declaration in Form 60 has been duly furnished with complete particulars.

Therefore a person who is raising invoices in the above said transactions S. No. 5 (hotel or restaurant) or 6 (foreign travel) or 18 (sale of goods or services exceeding Rs. 2,00,000) shall mention the PAN of buyer/service receiver on the invoice or document issued.

Key points on Form 60

  • It is a Form for declaration to be filed by an individual or a person (not being a company or firm) who does not have a permanent account number (PAN) and who enters into any transaction specified in rule 114B(mentioned in above table),
  • It requires the estimated total income (including income of spouse, minor child etc. as per section 64 of Income-tax Act, 1961) for the financial year in which the said transaction is held,
  • The person accepting the declaration shall not accept the declaration where the amount of income of the nature [estimated total income (other than agricultural income)] exceeds the maximum amount which is not chargeable to tax, unless PAN is applied for and its acknowledgement number is duly filled.
  • 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.

(i) in a case where tax sought to be evaded exceeds twenty‐five lakh rupees, with rigorous imprisonment which shall not be less than six months but which may extend to seven years and with fine;

(ii) in any other case, with rigorous imprisonment which shall not be less than three months but which may extend to two years and with fine.

C. Reporting requirements of Form 60 [Rule 114D]

Every person who have received Form 60 on or after 01 January 2016 in relation to transactions specified in above table, shall be required to file Form 61 to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation) through online transmission of electronic data to a server designated for this purpose and obtain an acknowledgement number and retain Form No. 60 for a period of six years from the end of the financial year in which the transaction was undertaken.

Due date for filing of Form 61:

30th April for declarations received till 31st March

31st October for declarations received till 30th September

Who can file Form 61 on behalf of the assessee?

  • The Form 61 shall be filed by person specified under section 140 of the Act.

D. Furnishing of statement of financial transaction [Rule 114E]

With effect from 1 April 2016, every person who has undertaken the specified transaction will file the statement for detail of such transaction in Form 61 annually.

Form 61A shall be furnished to department on or before 31st May, immediately following the financial year in which the transaction is registered or recorded.

Further, we have identified some transactions given under Rule 114E, which generally impacts the Company and person other than company who are subject to audit under section 44AB of the Act. The following class of persons is required to furnish a statement of financial transactions under Form 61A for the transactions given below (Applicable for transactions entered on or after 01 April 2016):

S.No.Nature and value of transactionsClass of person
1Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company).A company or institution issuing bonds or debentures.

 

2Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company.A company issuing shares.
3Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year.

 

A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013).

 

4Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. No. 1 to 10 of this rule, if any.Any person who is liable for audit under section 44AB of the Act.

Now, the seller will be required to maintain the person wise detail of cash sales for computing the threshold limit of Rs. 2 Lakhs received from such person.

The statement shall be furnished electronically by the Company/person other than Company, using digital signature of the designated director/managing partner/proprietor/principal officer.

As per the notification, “Designated Director” means a person designated by the reporting person to ensure overall compliance with the obligations imposed under section 285BA of the Act and the rules 114B to 114D and this rule and includes—

(i) the Managing Director or a whole-time Director, as defined in the Companies Act, 2013 (18 of 2013), duly authorized by the Board of Directors if the reporting person is a company;

(ii) the managing partner if the reporting person is a partnership firm;

(iii) the proprietor if the reporting person is a proprietorship concern;

(iv) the managing trustee if the reporting person is a trust;

(v) a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting person is, an unincorporated association or, a body of individuals or, any other person.

It is advised that the Company should designate a director as designated director through board resolution for filing Form 61A with the department. Similarly the partnership firms should also designate a partner for complying with the same.

Penalty for non-furnishing of statement will be of Rs. 100 per day of default. However, if he assessee receives any notice from the department for filing the statement then it shall be filed within limit of 30 days from the date of service of notice. In case of such default, the penalty shall be levied of Rs. 500 per day of default.

Information which will be shared by the respective reporting authorities under form 61A and needs special attention of the assessee:

S.No.Nature and value of transactionImplication
1.Cash deposit or withdrawal aggregating to Rs. 50 Lakh or more in a financial year from one or more current account of a personThe banking company will share the information of the assessee with the department.
2.Cash deposits aggregating to Rs. 10 Lakh or more in a financial year in one or more saving account of a personThe banking company will share the information of the assessee with the department.
3.One or more fixed deposit/time deposit of a person aggregating to Rs. 10 Lakhs or more in a financial year (other than renewal of another time deposit)The banking company or post office or Nidhi or NBFC will share the information of the assessee with the department.
4.Payment by any person of Rs. 1 Lakh in cash or Rs. 10 Lakhs or more by any other mode against bills raised in respect of one of more credit cards issued to that personThe Credit card issuing agency will furnish the information with the department.
5.Payment of Rs. 10 lakhs or more for following transactions:

·       acquiring bonds or debentures or

·       acquiring shares including share application money or

·       buyback of shares (other than shares in open market)

·       acquiring units of one or more schemes of mutual funds,

·       purchase of foreign currency,

The issuing company or trustee of the mutual fund or the authorized person as refered in FEMA, as the case may be, shall furnish the information with the department.
6.Purchase of immovable property for an amount of Rs. 30 Lakhs or moreThe registrar or sub registrar shall furnish the information with the department about such transaction.
7.Cash payment exceeding Rs. 2 Lakh during a financial year for purchase of goods or servicesThe assessees who are subject to audit under section 44AB of the Act shall furnish the information with the department.

The Income tax department may use such information for any further enquiries/investigation; hence it is advisable that correct information is obtained/furnished within the due prescribed time.

(Author – CA Neeraj Kumar, RAPG & Co. Chartered Accountants in practice from Delhi and can be reached at info@rapg.in, 9999836182)

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written permission of the author.

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Tags : pan number (249)
  • Ramesh Babu

    i could not understand Sub Rule 2 of Rule 114C. whether the rule intention is
    either
    Mentioning of buyer/service receiver’s PAN on the bills raised by the service provider/seller of goods
    or
    it is the obligation of the service receiver/buyer to verify whether the seller/service provider has quoted his PAN on the bill?

  • Rani Jain

    Hello,

    If I had sold a car of value Rs. 2,50,000/-, completely in cash by obtaining Form 60 from the buyer, as due to non availability of PAN & also collected TCS of Rs 2500; whether I have to file 3 returns:
    1. TCS return u/s 206C, quarterly
    2. AIR under rule 114E, as receipt of amount in cash from a person exceeds Rs. 2 lacs, yearly.
    3. Return under rule 114D, as reporting of Form 60 received, Half-yearly

    Thanks

  • Raj Kumar

    What is details of rule 114e (7) point => Cash payment exceeding Rs. 2 Lakh during a financial year for purchase of goods or services

    The assessees who are subject to audit under section 44AB of the Act shall furnish the information with the department

  • Amit Kumar

    hi i want to know pan no mandatory for unregistered dealers?

  • Harish Dua

    Hello sir
    Kindly please advise whether quoting of PAN of donor is necessary if cash donations received by trust is above Rs. 20,000/-.

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