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CBDT broadens scope of PAN requirements to track transactions

Already, there is a requirement for quoting PAN on bank deposits of over ₹50,000 made in one day and on a host of other transactions

As per this, cash deposit or withdrawal exceeding 2 million in one or more bank account or post office in a financial year would need to quote PAN or Aadhaar--the biometric identification number issued by Unique Identification Authority of India (UIDAI). The 2 million threshold is for the aggregate of all deposits or aggregate of all withdrawals in a year. This requirement also covers deposits and withdrawals from cooperative banks.

Also, a person who wants to open current account or cash credit account with a bank or post office needs to quote PAN, showed the Income–tax (Fifteenth Amendment) Rules notified on Tuesday.

The rule also says that any person who intends to make these transactions should apply for a PAN at least seven days before the date on which transaction is intended to be made.

Already, there is a requirement for quoting PAN on bank deposits of over 50,000 made in one day and on a host of other transactions like payment of over 50,000 for purchase of mutual funds, debentures, foreign exchange and for settling hotel bills at any one time.

The annual threshold of 2 million deposit or withdrawal suggests that one cannot breach this threshold without quoting PAN by making too many smaller deposits below the daily threshold of 50,000 without PAN.

The expansion of the use of PAN signals the income tax department’s increased oversight of economic activity in the country. This enables the authorities to assess whether spending pattern of individuals and entities as well as their assets match with their reported income. Already, the tax department makes available to the taxpayer a list of transactions reported to it by third parties so that assessees do not miss out any income while filing their tax returns.

According to Mitesh Jain, partner at law firm Economic Laws Practice, obtaining and quoting of PAN by a person depositing or withdrawing cash exceeding two million in a financial year and opening a current or cash credit account would provide additional data points to the tax authorities and such transactions may be reflected in the ‘Insights’ portal. Project Insight is the income tax department’s integrated data warehousing and business intelligence platform meant to encourage voluntary compliance and to deter non-compliance.

“This notification has widened the reporting and compliance framework for taxpayers and increased the information monitoring by the tax authorities," said Jain.

The new rules also put the onus of ensuring compliance on both the persons who make deposits as well as on the recipient—banks, cooperative banks and the Post Master General.