The government has changed the Rule 114B of the Income Tax Rules effective from 1st January 2016 which regulates the application of Permanent Account Number or PAN in various financial transactions . It is clear that changes brought in the Rule are going to effect a large number of taxpayers and business all over India. The official press release issued by CBDT cites the reason of curbing the circulation of black money as the major reason for incorporating changes in the Rule 114B .
First Good News on PAN
The monetary limit for mandantory quote of PAN has been increased in certain financial transactions . One of the major item is purchase of immovable property . So , now if you buy land , no PAN shall be required upto purchase value of Rs 10 Lakhs. But readers should keep in mind that even if the value of transaction in immovable property is less than Rs 10 Lakh, if the value for stamp duty is 10 lakh or more , the PAN shall still be required.
The monetary limits have also now been raised to Rs.50,000 from Rs. 25,000 in the case of hotel or restaurant bills paid at any one time, and to Rs. 1 lakh from Rs. 50,000 for purchase or sale of shares of an unlisted company.
BAD News
Based on recommendations of the Special Investigation Team (SIT) on Black Money for mandatory quote of PAN on all sales and purchases of goods and services where the payment exceeds Rs.1 lakh the Government has decided that quoting of PAN will be required for transactions of an amount exceeding Rs.2 lakh regardless of the mode of payment.
Chart for Changes Incorporated in New Rules
| Sl. | NATURE OF TRANSACTION | MANDATORY QUOTING OF PAN (RULE 114B) |
| New requirement | ||
| 1. | Immovable property | i. Sale/ purchase exceeding Rs.10 lakh;
ii. Properties valued by Stamp Valuation authority at amount exceeding Rs.10 lakh will also need PAN. |
| 2 | Motor vehicle (other than two wheeler) | No change |
| 3. | Time deposit | i. Deposits with Co-op banks, Post Office, Nidhi, NBFC companies will also need PAN;
ii. Deposits aggregating to more than Rs.5 lakh during the year will also need PAN |
| 4. | Deposit with Post Office
Savings Bank |
Discontinued |
| 5. | Sale or purchase of securities | No change |
| 6. | Opening an account (other than time deposit) with a banking company. | i. Basic Savings Bank Deposit Account excluded (no PAN requirement for opening these accounts);
ii. Co-operative banks also to comply |
| 7. | Installation of telephone/
cellphone connections |
Discontinued |
| 8. | Hotel/restaurant bill(s) | Cash payment exceeding
Rs.50,000/-. |
| 9. | Cash purchase of bank drafts/
pay orders/ banker’s cheques |
Exceeding Rs.50,000/- on any one day. |
| 10
. |
Cash deposit with banking company | Cash deposit exceeding Rs.50,000/- in a day. |
| 11. | Foreign travel | Cash payment in connection with foreign travel or purchase of foreign currency of an amount exceeding Rs.50,000/- at any one time (including fare, payment to travel agent) |
| 12
. |
Credit card | No change.
Co-operative banks also to comply. |
| 13
. |
Mutual fund units | Payment exceeding Rs.50,000/- for purchase. |
| 14
. |
Shares of company | i. Opening a demat account;
ii. Purchase or sale of shares of an unlisted company for an amount exceeding Rs.1 lakh per transaction. |
| 15
. |
Debentures/ bonds | Payment exceeding Rs.50,000/-. |
| 16
. |
RBI bonds | Payment exceeding Rs.50,000/-. |
| 17
. |
Life insurance premium | Payment exceeding Rs.50,000/- in a year. |
| 18
. |
Purchase of jewellery/bullion | Deleted and merged with next item in this table |
| 19
. |
Purchases or sales of goods or services | Purchase/ sale of any goods or services exceeding Rs.2 lakh per transaction. |
| 20
. |
Cash cards/ prepaid instruments issued under Payment & Settlement Act | Cash payment aggregating to more than Rs.50,000 in a year. |