Quoting of PAN in various transactions (Rules 114B to 114E)

Article explains Income Tax Rules related to Quoting of PAN in various transactions. Income Tax rules are Quoting of PAN (Permanent Account Number) [Rule 114B], Verification of PAN –[Rule 114C], Reporting requirements of Form 60 [Rule 114D]  and Furnishing of statement of financial transaction [Rule 114E].

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.

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:-

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 either in paper form or electronically under the electronic verification code in accordance with the procedures, data structures, and standards specified by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems).

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).

Further, also note that a person who has an account (other than a time deposit referred to at S.No.12 of the Table and a Basic Saving Bank Deposit Account) maintained with a banking company or a co-operative bank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) and has not quoted his permanent account number or furnished Form No. 60, as the case may be, at the time of opening of such account or subsequently, he shall furnish his permanent account number or Form No.60, as the case may be, to the person specified in clause (c) of sub-rule (1) of rule 114C on or before the 30th day of June, 2017.

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

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:

30^th April for declarations received till 31^st March

31^st October for declarations received till 30^th September

Note: The statement in respect of the transactions listed in clause (ii) of column (3) of serial number (10) of the Table under rule 114B shall be furnished on or before the 15th day of January, 2017

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 31^st 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):

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:

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 [email protected], 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.

Republished with Amendments