Requirement of PAN and TCS on Cash Transaction

Background:

In order to 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 with effect from 01-01-2016, under section 139A (5) (c) and furnishing a statement of financial transaction under section 285BA read with rule 114B to 114D as amended via notification 95/2015 dated 30-12-2015 and liability of TCS w.e.f 01-06-2016 where consideration on sales of goods or providing services received in cash.

In Case, where PAN of the buyer available:

Quoting of PAN Requirements:

PAN will be required to be quote on invoice / bill at the time of Sale or purchase of any goods or services if a transactions above Rs. 2,00,000/- regardless of the mode of payment (weather in cash or cheque).

Where buyer is a minor, in that case PAN of his father or mother or guardian, as the case may be, on the invoice / bill of the said transaction, shall be quote.

Reporting Requirements:

Every person who is liable for audit under section 44AB of the Act (reporting person i.e. seller) –

• If receipt cash payment exceeding Rs. 2,00,000/- from any person for sale of goods or services of any nature;
• Shall Verify the PAN of buyer by taking copy of PAN card;
• Shall obtain one time registration t as reporting entity from IT Department;
• Shall submit a annual return in Form No. 61A through online on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded.

The above rule will not be apply in case where buyer is a –

1. Central Government, the State Governments and the Consular Offices
2. Non-Residents referred to in clause (30) of section 2 of the Act.

Therefore, we can say that quoting of PAN on the invoice is mandatory only if transaction exceed Rs. 2,00,000/- and reporting (filling of annual return in Form 61A) is mandatory only if Cash payment received exceed Rs. 2,00,000/-In Case, where PAN of the buyer not available who is a resident of India:

Quoting of PAN Requirements:

Where a buyer does not have and who enters into any transaction for sales or purchases any goods or services, he shall make a declaration in Form 60 giving therein the particulars of such transaction if a transactions above Rs. 2,00,000/- regardless of the mode of payment (weather in cash or cheque).

Reporting Requirements:

Every person who is liable for audit under section 44AB of the Act (reporting person i.e. seller) has received Form-60 on or after 01-01-2016:

• Shall verify a declaration in Form 60 has been duly furnished with complete particulars;
• Shall obtain one time registration t as reporting entity from IT Department;
• Shall file annual return in Form No. 61 through online on or before –
  • 30^th April for declarations received till 31^st March and
  • 31^st October for declarations received till 30^th
• Shall retain Form No. 60 for a period of six years from the end of the financial year in which the transaction was undertaken.

Penalty:

• Under 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.
• Under section 271FA, Assessing Officer may levy a penalty of Rs. 100 per day for non-filling of Form- 61/61A and Rs. 500 per day after issue notice of non-filling.
• Under section 271FAA, Assessing Officer may levy a penalty of Rs. 50,000/- for furnishing inaccurate Form 61/61A.

TCS:

Further, if consideration for sales of Goods or Providing any service received in cash full or in part then under section 206C (1D) of the Act, Every person, being a seller who is liable to tax audit under section 44AB, is liable to collect from the buyer, a sum equal to 1% of sale consideration received in Cash only as income-tax, if such Cash sales consideration exceed Rs. 2,00,000/-.

(Author – Sombir Kataaria from Gurgaon and can be reached at [email protected], 9911166244)

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.