The move is seen as a way to curb black money; the new regulations come into effect from 1 January 2016
Mint, 16/12/15, Source: http://www.livemint.com/Politics/UkFNyKXvjG8oE3QxzSM6bI/PAN-compulsory-for-opening-all-bank-accountsm-says-revenue.html
The central government has made it a must to quote the permanent account number (PAN) for all transactions above Rs.2 lakh in a bid to curb black money.
This requirement will come into effect from January 2016 and will be applicable on all sale and purchase of goods and services and for all modes of payment, the tax department said in a statement on Tuesday.
Such a move will bring all high-value household purchases like high-end electronic gadgets, foreign holidays booked through tour packages, luxury items like expensive watches and gold jewellery purchases under the lens of the taxmen.
PAN is already a must for almost all financial sector transactions, car purchases and to buy immovable property above a certain limit.
Quoting PAN will help create an audit trail of all high-value transactions by one particular individual and help the tax department determine if it is in line with the declared income of that person.
This will help the government widen its tax base, curb the circulation of black money and move towards a cashless economy.
The government also made PAN mandatory for the purchase of cash or prepaid cards amounting to Rs.50,000 or more in year. Gold jewellery above Rs.2 lakh too would need PAN details. The current limit is Rs.5 lakh. All fixed deposits with post offices, cooperative banks, Nidhis, non-banking finance companies will also need PAN.
The government has also announced certain relaxations in monetary limits for quoting PAN in certain transactions to “bring a balance between the burden of compliance on legitimate transactions and the need to capture information relating to transactions of higher value”.
For instance, the monetary limit for quoting PAN for sale or purchase of immovable property has been raised to Rs.10 lakh from Rs.5 lakh.
Similarly, PAN needs to be quoted only for a cash payment for a hotel or restaurant bill of Rs.50,000 as against Rs.25,000 applicable at present for any mode of payment.
PAN will also be mandatory for the purchase or sale of shares of an unlisted company amounting to Rs.1 lakh. The limit earlier was Rs.50,000. No-frills bank accounts opened under the Pradhan Mantri Jan Dhan Yojana have been exempted from quoting PAN.
But all other bank accounts, including those opened with cooperative banks, will have to quote PAN. The government has also done away with the need to quote PAN while applying for a telephone or cell phone connection. Also cash payments of only Rs.50,000 and above related to foreign travel like for purchase of forex need PAN, as against the earlier limit of Rs.25,000.
This measure follows the recommendation of the special investigation team (SIT) on black money, which had recommended that PAN should be made mandatory for all transactions above Rs.1 lakh.
Subsequently, finance minister Arun Jaitley had announced this in his budget speech in February. However, after the industry expressed concern over the burden of compliance, the government decided to increase the limit to Rs.2 lakh.
Revenue secretary Hasmukh Adhia said it will ensure that transactions prone to black money usage like gold and bullion purchase as well as transactions related to luxury spends like hotels and foreign exchange purchase come under the tax department’s watch.
N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy in New Delhi, said the whole purpose of the move is to improve tax mobilization and check tax evasion.
“The government has no option but to increase the tax base. The Rs.2 lakh limit is still high. There is no reason why the purchase of luxury items should go unreported,” he said.
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