prpri PAN compulsory on Transaction above Rs. 2 Lakh PAN compulsory on Transaction above Rs. 2 Lakh

PAN compulsory on all Sales or Purchase of goods or services above Rs.2 Lakh

Arjuna (Fictional Character): Krishna, PAN is required to be quoted in sale or purchase transaction exceeding Rs.2 lakh. Which is this hidden income tax provision?

Krishna (Fictional Character): Arjuna, Income tax Department has mentioned in rules, when a person is required to obtain PAN compulsorily and where it is required to be quoted or given. Everyone knows that PAN has to be quoted while opening the bank account, effecting transactions of immovable property. But from 1st January 2016 onwards, the law has been changed and now it has been made compulsory to quote PAN where the amount of each purchase or sale of goods or services exceeds Rs.2 Lakh. Many people does not know about this change, so PAN is not quoted in such cases. The responsibility to quote PAN is on both, purchaser and seller. So each and every traders should understand this provision otherwise he would have to face its consequences.

Arjuna: Krishna, who are required to compulsorily obtain PAN?

Krishna: Arjuna, according to section 139A of Income Tax Act, if a person’s income exceeds the basic exemption limit or his annual turnover exceeds Rs.5 lakh or TDS gets deducted on his income then he would have to compulsorily obtain PAN.

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Arjuna: Krishna, on which transactions quoting of PAN is compulsory?

Krishna: Arjuna, Section 139A states about quoting of PAN and type and limit of transactions is given in rule 114B,C and D of Income Tax rules. Out of them, the major transactions and their limits are given below:

  1. Every person (be it a trader or not) will have to quote PAN in case of all transactions of sale or purchase of any goods or services where amount exceeds Rs.2 Lakh. For example, if a cloth trader purchases cloth in wholesale for Rs.3 Lakh, then he would have to quote his PAN. Buyer will have to give PAN and seller will have to quote it on all papers like sales bill, etc. after verifying the PAN. The Income Tax Department has given the responsibility of furnishing the PAN and quoting it to the purchaser as well as the seller.
  2. PAN will have to be quoted while purchasing any motor vehicle except two wheeler.
  3. For opening a bank account or demat account, PAN will have to be quoted.
  4. In case the hotel or restaurant bill paid in cash in excess of Rs.50,000, PAN no. will have to be quoted.
  5. If the payment for the purpose of foreign tour or for purchasing foreign currency exceeds Rs.50,000 in cash, PAN will have to be quoted.
  6. To deposit money in bank or to buy the mutual fund, PAN will have to be quoted.
  7. PAN will have to be quoted in case the amount of sale or purchase of immovable property exceeds Rs.10 Lakh.
  8. PAN will have to be quoted for the transactions on which TDS or TCS have to be deducted.

Many other transactions are there which needs to be taken care off.

Arjuna: Krishna, what should a person do if he doesn’t have PAN and what are the duties of Seller?

Krishna: Arjuna, if the transaction effected by any person is covered under the aforesaid conditions and if he does not have PAN then he would have to give declaration in Form 60 of Income Tax. If a person earns income from agriculture and if he does not have income from any other source and he filed Form 61, then he will not be required to quote his PAN. Similarly, nonresident person is not required to quote PAN. Further the declarations received in Form 60 by the seller form persons who do not have PAN, shall file on line Form 61 as per rule 114D within one month from the end of six months. i.e., for April to Sept, on 31st Oct and From Oct to March, 30th April each year. This rule is also applicable to all Tax Audit Cases. Copy of Form 60 needs to preserve for 6 years by the seller.

Arjuna: Krishna, what will happen if a taxpayer does not quote his PAN?

Krishna: Arjuna, if a taxpayer does not quote his PAN for the aforesaid transactions, then Income Tax Officer can impose a penalty of Rs.10, 000 as per Rule 272B.

Arjuna:Krishna, what the taxpayers should learn from this?

Krishna: Arjuna, in our country many people perform various type of transactions like purchase for marriage, business, etc. Many people does not take such purchases into consideration. To keep an eye on such purchase or sale transactions, the Income Tax Department has introduced this provision of PAN from 1st January 2016. This provision is also applicable to all common people. Because of this it is expected that such transactions will come into books at least in some proportion and the revenue of government will increase.  Further please note that there is difference in TCS provision of 1% on Sales or purchase of any goods or services above Rs. 2 lakhs and this rule of 114B, element of Cash is not there in 114B, where as it is there in TCS. Many type of issues may arise in mind of taxpayer. Hence care full reading and compliance is required in such transaction above Rs. 2 lakhs now by all. How this rule will be implemented is the rule issue. As there is no aware ness in taxpayers and the business community of this. Now the time has come, that many will be PANIC due to PAN.

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)

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1. Vice-Chairmen of WIRC of ICAI for the year 2015-2021. 2. Youngest Chairman of Aurangabad Branch of WIRC of ICAI in 2002. 3. Author of Popular Tax articles series based on Krishna and Arjuna conversation i.e “KARNITI” published in Lokmat on every Monday. Till date 335+ weekly articles ha View Full Profile

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  1. Abhinandan says:

    what if govt authorities who do not possesses PAN and not furnished neither Form 60 and PAN, then how to comply such provision..Is there any exception for such situation

  2. Arvind R Shah says:

    The article on QUOTING OF PAN has some comments for which article contributor has not given replies.Moreover over Actual rules also should have been quoted.

  3. NAVEEN VAISH says:

    We are purchasing goods from farmer( VEGETABLE SEEDS ) and we have to pay them in cash.MORE THAN 2 LAC So in this case whether it is applicable or not.

  4. Vinod Kamath says:

    The customer is a known person. He gives only PAN number. But don’t show it. We verify the correctness of his name & PAN number in NSDL site. It is genuine. In such case is it sufficient to quote his PAN number or it is mandatory to get a copy of his PAN card?

  5. Rani Jain says:

    If I had sold a car of value Rs. 2,50,000 in 4.6.16, completely in cash and for Rule 114B collected Form 60 from buyer, due to non availability of PAN with buyer.

    Now whether I have to file 3 returns :
    1. TCS return u/s 206C, quarterly.
    2. AIR under rule 114E (receipt of cash from a person exceeds Rs. 2 lac), yearly.
    3. Return u/r 114D (collection of Form 60), half yearly.


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July 2021