Tax Bulletin - Vol.1 Issue 3

PAN made mandatory in many cases

The Ministry of Finance has, via a Press Release issued on 15th December, amended Rule 114B of the Income Tax Rules, 1962. This amendment will come into effect from 1st January, 2016.The Rule is in relation to quoting of PAN for various specified transactions. This tax alert highlights the amendments.


Presently, the PAN is required to be quoted for specified transactions such as purchase or s ale of immovable property valued at INR 5 lakhs or more, opening any bank account, hotel or restaurant bills above INR 25,000 paid by any mode etc. In order to balance out the burden of compliance for genuine tax payers while remaining committed to curbing the black money circulation, the Government of India has enhanced the monetary limits of transactions requiring PAN quotation as follows:

a) The most important change is that purchases and sales of goods or services in excess of Rs. 2 lakhs per transaction will require the PAN to be quoted. This requirement was not there earlier.

b) For sale or purchase of immovable property, the limit has been extended to INR 10 lakhs. Apart from this, there is an additional requirement to quote PAN for properties valued by a Stamp Valuation Authority at INR 10 lakhs or more.

c) The requirement of quoting of PAN for opening a savings bank account has been done away with. There was earlier a requirement of quoting the PAN while making deposits with the Post Office Savings Bank as well, which is discontinued too. Earlier, while ope ning an account with a co-operative bank, PAN was not required. However now, PAN would be required in such cases also.

d) Seeing the growth of time deposits with NBFCs, Nidhi and post office sand to widen the tax net, the Rule has been extended to deposits with such entities also if the aggregate deposits in a year is more than INR 5 lakhs.

e) The monetary limit for hotel or restaurant bills has been raised to INR 50,000 (from the present INR 25,000) for payments by cash.

f) If someone purchases bank drafts, pay orders or banker's cheques by cash or if there are any cash deposits into a bank exceeding INR 50,000 on any one day, then such person will have to comply with the Rule.

g) Till 31st Dece mber, 2015, PAN will have to be quoted for foreign travel related expenses exceeding INR 25,000 paid in cash. From 1st January, 2016 onwards this limit will be enhanced to INR 50,000.

h) For applying for new credit cards, the PAN will still be required to be quoted. Here the change made is that even cards issued bye co-operative banks are now covered.

i) There is no change for quoting PAN when transacting in securities above INR 1 lakh. While subscribing to debentures and bonds, RBI bonds and for purchase of units of mutual fund, presently, PAN is required if the amount invested is INR 50,000 or more. A small amendment has been made to the limit.  Now, the Rule will be applicable to any payment exceeding INR 50,000/-.

j) A major change affects transaction s related to shares. On or after 1st January, 2016 PAN will be mandatorily quoted even to open a de-mat account. Further, the purchase as well as sale exceeding INR 100,000 per transaction of shares of an unlisted company will also be under the purview of the Rule.   

k) PAN will be required to be quoted at the time of payment of life insurance premium exceeding INR 50,000 in a year. Presently, the Rule applies to payments of INR 50,000 or more.

l) Prepaid instruments and cash cards, for the first time have been included within the purview of this rule. So any cash transactions using these instruments to refill the prepaid card etc. for more than INR 50,000 in a year will require PAN to be quoted.

m) There is no change in the requirement of quoti ng PAN on purchasing or selling a motor vehicle other than two wheelers.

n) As regards purchase of jewellery and bullion, presently, the Rule applies to payment of INR 5 lakhs or more at any time or against a bill. As per the amendment, this item has been merged with the one dealing with "purchase or sale of goods or services" and therefore, the limit for this type of transaction also stands at INR 2 lakhs per transaction.

MCA's comments
The amendments to Rule 114B of the Income-tax Rules, 1962 give a clear signal about the intentions of the government in widening the tax base and curbing the use of black money. Readers may recollect that a few months ago, the CBDT had publicly declared that they target an increase in tax payer base by 3 crore every year. Such an ambitious target obviously needs concerted and stern action. The amendments carried out are in this direction. One hopes that the process of obtaining a PAN is also simultaneously simplified so that the new set of people who would now be covered by the Rule do not face delays or problems in applying for a PAN.

We hope this information was useful and of interest to you. 

Tax Bulletin - Vol.1 Issue 4
Capital Gains – An overview


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