Those who deposit or withdraw more than Rs 20 lakh in cash from a bank account including co-operative banks and post offices in a financial year, will now have to place their bid permanent account number (pan) or base number. With the implementation of the new rules, the requirement has been made mandatory from 26 May. The rules will also be applicable for opening current account. Here’s what the new rules say and why it has been made mandatory:
what are the rules
According to a notification dated May 10 by the Central Board of Direct Taxes (CBDT), “Every person, while entering into the transaction specified in column (2) of the table below, shall quote his Permanent Account Number or Aadhaar Number, as the case may be. as the case may be, in the documents relating to such transaction, and every person referred to in column (3) of the said table, who receives such document, shall ensure that the said number is duly quoted and certified.”
Column (2) mentions withdrawal, cash deposit and opening of current account or cash credit account in excess of Rs 20 lakh where the new rules will be applicable.
Column (3) mentions the persons who obtain PAN and Aadhaar and ensure that the numbers are authenticated. “a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) the Post Master General, as the Indian referred to in clause (j) of section 2 of the Post Office Act, 1898 (6 of 1898),” as per column (3) of the table in the notification.
As per the notification, PAN or Aadhaar number along with demographic information or biometric information of an individual shall be submitted to the concerned authority for the purposes of authentication.
Why has it been made mandatory?
This will help the Income Tax Department to monitor high value cash transactions, and deposits/withdrawals where tax would not otherwise have been paid by the individual on his income.
The rules will help the government track the movement of cash in the financial system. These rules are expected to further tighten the loopholes along with the existing provision for deduction of TDS under Section 194N of the Income Tax Act, 1961.
Nangia & Co LLP partner Shailesh Kumar said, “This may help the tax department plug some loopholes, such as for high value deposits and withdrawals where they say they do not have PAN. It can be applied in case of cultivators or non-income taxpayers. PAN-Aadhaar interoperability will help banks to record details for those who do not have PAN. Earlier, there was no limit to generate PAN for withdrawal.”
Meanwhile, the government has also asked people to link their PAN numbers with Aadhaar. The Finance Ministry has said that after March 31, 2023, the PAN of taxpayers, who fail to mandatorily inform their Aadhaar, will become inoperative and all results submitted under the Act (Income Tax Act, 1961), informed To quote or not to quote. PAN will be applicable to such taxpayers.
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