In this write up I have tried to compile – provisions related with PAN under Income Tax Act, 1961 (Section 139A & 139AA and 272B), Income Tax Rules (Rule 114) and FAQs on PAN issued by Income Tax Department. For further clarity on the topic these are the references.
PAN is the need of Income Tax Department to identify/link all transactions of one entity at one place. These transaction include TDS/ TCS credits, return of income, specified transactions correspondences etc and so on. It facilitates easy retrievals of Information of PAN holder and matching of various investments, borrowings and other business activities of PAN holder.
What Information is needed by them :- Income is deduced on the basis of following economic formula :-
Income + Borrowings (To supplement Income) = Expenditure + Investment
Normally we understand it without the periodicity but their department add concept periodicity in it and try to balance this fundamental economic equation with specific reference to a Year which is called Financial Year. To seek information through all means is also necessary to reduce chances of error & omission and fraud/
Besides a person who is already dealing with Income Tax department in any ways (Since they identify an entity through number called PAN) every other person must have PAN If sales of his business exceeds 5.00 Lacs and if he is NRI and He is having financial transactions more than 2.50 Lacs. Further It has been made mandatory to quote PAN in certain specified Financial Transactions. Out of the list of specified financial transactions following transactions are directly related with our Industry (i.e. Banking):-
1) Opening an account [other than a time-deposit referred at point No. 10 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank
2) Making an application for issue of a credit or debit card.
3) Opening of a demat account with a depository, participant, custodian of securities or any other person with SEBI
4) Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
5) Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its units
6) Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring debentures or bonds issued by it.
7) Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds issued by it.
8) Deposits of cash exceeding Rs. 50,000 during any one day with a banking company or a cooperative bank.
9) Payment in cash for an amount exceeding Rs. 50,000 during any one day for purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank.
10) A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with –
(i) a banking company or a co-operative bank
(ii) a Post Office;
(iii) a Nidhi referred to in section 406 of the Companies Act, 2013 or
(iv) a non-banking financial company
10) Payment in cash or by way of a bank draft or pay order or banker’s cheque of an amount aggregating to more than Rs. 50,000 in a financial year for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 to a banking company or a co-operative bank or to any other company or institution. [As amended by Finance Act, 2020]
11) Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer
12) A contract for sale or purchase of securities (other than shares) for amount exceeding Rs. 1 lakh per transaction
13) Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange for amount exceeding Rs. 1 lakh per transaction.
14) Sale or purchase of any immovable property for an amount exceeding Rs. 10 lakh or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
1) Minor person can quote PAN of his father or mother or guardian provided he does not have any income chargeable to income-tax.
2) Any person, who does not have PAN and enters into any of above transaction, can make a declaration in Form No.60.
3) Quoting of PAN is not required by a non-resident in a transaction referred at point No. 2 or 6 or 9 or 10.
4) Any person who has an account (other than a time deposit referred at point no. 10 and a Basic Saving Bank Deposit Account) maintained with a banking company or a co-operative bank. He will be required to furnish his PAN or Form No.60 on or before 30-06-2017 if he has not quoted his PAN or furnished Form No. 60 at the time of opening of such account or subsequently.
Every person who is applying for the issuance of PAN must quote his Aadhar No. in application after 01.07.2017. This amendment was brought in Income Tax Act, 1961 so that all the requisite information available with Income Tax Department should be made available to government. This interchangeability does not do away with the necessity of PAN. It’s interchangeability is in just quoting and not holding. If a person does not link his Aadhar with PAN with in time his PAN number shall stand Inoperative. If he quote that PAN in further correspondences then it will be quoting wrong PAN / not quoting of PAN. In those cases penalty of Rs. 10,000 shall be applicable (Section 272B).
If a person satisfy following conditions than only this facility is available :-
PAN has 10digit structure. First five character are alphabets next four digits are numbers and then last digit is also alphabet. First three alphabets represent alphabetic series running from AAA to ZZZ. Fourth alphabet represent status (like c for company, P for Individual, F for Firm etc.). Fifth alphabet represent first character of Last name of individual and first letter of company’s name. next fourt characters which are numbers are sequential numbers running from 0001 to 9999. And finally last character is alphabetic check digit.