Transactions Pan Compulsory Rule 114b: PAN stands for Permanent Account Number and it is a ten-character alphanumeric code given to every person who applies for it or is issued by the department without an application. The Income-Tax Department of India issues PAN to every single person recognized by it.
PAN is an electronic setup that identifies and records all the financial transactions relating to a particular person or company. The information of every PAN is stored in the records of the Income-Tax Department, which prevents two taxpayers from having the same PAN number.
The Government enforced quoting of PAN on certain financial transactions to decrease the circulation of black money in the markets and increase the tax base. Section 139(A) of the Income-Tax Act suggests that PAN is compulsory for all the financial transactions quoted by the CBDT. In contrast, Rule 114 B of Income-Tax, states all the transactions that require quoting of PAN.
Here, in this article, we will discuss all the transactions that require compulsory quoting of PAN.
Transactions That Require Quoting of PAN
As discussed earlier, certain compulsory transactions that require PAN to be initiated. So here is the list of all those transactions:
- Motor Vehicle: Rule 114 B states, all the transactions such as the sale or purchase of any motor vehicle except for two-wheelers require the PAN number for the transaction.
- Opening A Bank Account: According to rule 114 B, Any person who desires to open a bank account must provide PAN details. It applies only to the opening of new accounts.
- Opening A Demat Account: According to rule 114 B, a person who desires to open a Demat account must produce the PAN number to initiate the transaction. All Demat accounts are associated with the sale and purchase of shares; thus, it requires PAN.
- Applying For Debit or Credit Card: As per 114 B, all the applicants of debit and credit cards must provide the details of PAN to get validated.
- Payment of bill to a Hotel or Restaurant: Rule 114 B suggests that if a person pays more than ₹50,000 in cash toward the bill of a restaurant or a hotel, they must provide the PAN number to proceed.
- Payment relating to Foreign tour or Foreign currency: The rule 114 B states that any payment in relation to foreign travel or payment made for purchasing foreign currency requires a PAN number. The only point to remember here is that the transaction must exceed ₹50,000 and be made in cash.
- Payment for the Purchase of Mutual Funds: Any transaction relating to the purchase of mutual funds or their units is subjected to the quoting of PAN. The transaction requires PAN only when the amount of the transaction exceeds ₹50,000.
- Payment for Acquiring Bonds or Debentures: Any payment made to a company or an institution for acquiring bonds or debentures requires the quoting of PAN, but the transaction must exceed ₹50,000.
- Payment to RBI for Bonds: As per 114 B, any payment made to the RBI for acquiring bonds issued by it requires PAN details to be initiated. PAN is only required when such transactions exceed ₹50,000.
- Depositing Money: Rule 114 B states that any monetary deposit made with the bank or co-operative bank, or the post office requires PAN when the transaction amount exceeds ₹50,000 in cash in a single day.
- Purchase of Bank Drafts: As per the income tax act, any payment made for the purchase of bank drafts or pay order or banker’s cheque from a banking company or a co-operative bank requires a PAN number if the amount of the transaction exceeds ₹50,000 in a single day.
- Time Deposit: As per the rule of 114 B, any time deposit made with a banking company or co-operative bank or post office or Nidhi company, or a Non-Banking Financial Company requires PAN quoting. The PAN is only required when the amount of transaction exceeds ₹50,000 or aggregates to a total of ₹5,00,000 in a particular financial year.
- Payment for Prepaid Instruments: As per the Income-Tax act, any payment made in cash or by way of bank draft, pay order, or banker’s cheque amounting to an aggregate of ₹50,000 in a financial year requires PAN validation.
- Payment towards Life Insurance: Any payment made to the insurer against a life insurance premium exceeding ₹50,000 in a financial year requires the quoting of PAN.
- A contract for sale or Purchase of Securities: As per 114 B, any payment amounting to ₹1,00,000 per transaction made for the sale or purchase of securities requires PAN for validation.
- Sale or Purchase or Share of an Unlisted company: Any transaction relating to the sale or purchase of shares of an unlisted company requires PAN. The amount of the transaction must exceed ₹1,00,000 in a single transaction.
- Sale or Purchase of Immovable Property: As per 114 B, any transaction exceeding ₹10,00,000 and relating to the purchase or sale of an immovable property requires PAN validation.
- Sale or Purchase of goods or service: Any transaction exceeding ₹2,00,000 and relating to the purchase or sale of goods or services other than those mentioned above requires a PAN number.
When a person who is a minor makes any of the transactions mentioned above, and they do not have any income chargeable under Income-tax, is bound to provide the PAN details of their Father, Mother, or Guardian.
A person who does not have a PAN but still desires to make the transactions mentioned above, in such a case, they have to file a declaration in form 60 stating the details of such transaction.