Persons who deposit or withdraw more than Rs 20 lakh from bank account including cooperative banks and post offices in a financial year will now be required to submit their Permanent Account Number (PAN) or Aadhaar number. The requirement became mandatory from May 26 with the entry into force of the new rules. The rules will also apply to the opening of a current account. Here’s what the new rules say and why they were made mandatory:
What the rules say
According to a notification from the Central Commission for Direct Taxation (CBDT) dated May 10, “Any person must, when entering into a transaction specified in column (2) of the table below, quote his permanent account number or number Aadhaar, if any, in the documents relating to this transaction, and any person indicated in column (3) of the said table, who receives such document, must ensure that the said number has been duly quoted and authenticated.”
Column (2) mentions withdrawals of more than Rs-20-lakh, cash deposits and opening a current account or cash credit account where the new rules will apply.
Column (3) mentions the people who receive PAN and Aadhaar and ensures that the numbers are authenticated. “A banking company or 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) Post Master General as referred to in subsection (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898), ” according to column (3) of the table of the notification.
According to the notification, the PAN or Aadhaar number, along with an individual’s demographic information or biometric information, will be submitted to the concerned official for authentication.
Why was it made mandatory?
This will help the income tax department to monitor high value cash transactions and deposits/withdrawals where tax would not otherwise be paid by the individual on their income.
The rules will help the government trace the movement of cash through the financial system. These rules are expected to further tighten loopholes, as well as the already existing TDS deduction provision under Section 194N of the Income Tax Act 1961.
Shailesh Kumar, partner at Nangia & Co LLP, said: “It can help the tax department fill in some gaps, like for large value deposits and withdrawals where they say they don’t have a PAN. This could be applied in the case of farmers or taxpayers without income. PAN-Aadhaar interoperability will help banks record details of those without PAN. Previously, there was no threshold for producing PANs for withdrawals.”
Meanwhile, the government has also asked people to link their PAN number to Aadhaar. The Ministry of Finance has declared that after March 31, 2023, the PAN of taxpayers who fail to disclose their Aadhaar, as required, will become inoperative and all consequences under the law (Income Tax Act, 1961 ) not to provide, suggest, or quote the PAN applies to these taxpayers.
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