BLOG on Income Tax Management for - AY 2022-23 & 2023-24

Permanent Account Number (PAN) [Section 139A]

What is PAN (Permanent Account Number)
Mandatory Requirement to obtain PAN
Who has to apply for PAN ? [Section 139A(1)]
Application for Allotment of Permanent Account Number (PAN) [Rule 114(1) & (2)]
Time Limit for Submitting Application for allotment of PAN [Rule 114(3)]
PAN to be quoted in certain cases [Section 139A(5)]
Aadhaar Number to be intimated [Rule 114(5)] by every person who has been alloted PAN :

1. What is PAN (Permanent Account Number)

The provisions of Section 139A of the Income Tax Act, to be read with Rule 114 of the Income Tax Rules deal with the requirement of application and obtaining of Permanent Account Number.

PAN is a 10 digit code allotted to each essessee by I.T. Dept.

Quoting of the Permanent Account Number (PAN) has been made mandatory by the I.T. Department in many instances. An assessee needs to mention his PAN in his return.

A person has to apply in Form 49A to the Assessing Office having jurisdiction to assess the applicant. In order to improve PAN related services, the Dept. has authorized UTI Investor Services Ltd.( UTISIL) to manage IT PAN Services Centers in all cities or towns where there is an Income Tax Office, and National Securities Depository Limited (NSDL) to dispense PAN services.

The main advantages of having a PAN include, convenience to locate the Assessing Officer, Faster Assessment , Processing of Refunds, ensuring Tax Compliance, Credit for Payment of Taxes, and Control over unregulated and Undisclosed Transactions.

The application form should be filled in carefully and completely giving specified information, including name of the assessee, father’s name , address, date of birth, sources of income, etc.

Permanent Account Number (PAN) [Section 139A]

2. Mandatory Requirement to obtain PAN

Every person shall quote his permanent account number in all documents pertaining to the transactions specified in the Table below, namely;

TABLE

*SI. No.*	*Nature of transaction*	*Value of transaction*
*(1)*	*(2)*	*(3)*
1.	Sale or purchase of a motor vehicle or vehicle, as defined in section 2(28) of the Motor Vehicles Act, 1988 which requires registration by a registering authority under Chapter IV of that Act, other than two wheeled vehicles.	All such transactions.
2.	Opening an account (other than a time-deposit referred to at SI. No.12 and a Basic Savings Bank Deposit Account] with a banking company or a cooperative bank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act).	All such transactions.
3.	Making an application to any banking company or a co-operative bank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution, for issue of a credit or debit card.	All such transactions.
4.	Opening of a demat account with a depository, participant, custodian of securities or any other person registered under section 12(IA) of the Securities and Exchange Board of India Act, 1992.	All such transactions.
5.	Payment to a hotel or restaurant against a bill or bills at any one time.	Payment in cash of an amount exceeding Rs. 50,000
6.	Payment in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.	Payment in cash of an amount exceeding Rs. 50,000.
7.	Payment to a Mutual Fund for purchase of its units.	Amount exceeding Rs. 50,000.
8.	Payment to a company or an institution for acquiring debentures or bonds issued by it.	Amount exceeding Rs. 50,000.
9.	Payment to the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 for acquiring bonds issued by it.	Amount exceeding Rs. 50,000.
10.	Deposit with.— (i) a banking company or a co-operative bank to which the Ranking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Office.	Cash deposits,— (i) exceeding Rs. 50,000 during any one day; or (ii) aggregating to more than Rs. 2,50,000 during the period 09th November, 2016 to 30th December. 2016.
11.	Purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co- operative bank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act).	Payment in cash for an amount exceeding Rs. 50,000 during any one day.
12.	A time deposit with,— (i) a banking company or a co-operative bank to which the Ranking Regulation Act. 1949, applies (including any bank or banking institution referred to in section 51 of that Act); (ii) a Post Office; (iii) a Nidhi referred to in section 406 of the Companies Act, 2013; or (iv) a non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Rank of India Act, 1934, to hold or accept deposit from public.	Amount exceeding Rs. 50,000 or aggregating to more than Rs. Rs. 5,00,000 during a financial year.
13.	Payment for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007, to a banking company or a co-operative hank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution.	Payment in cash or by way of a bank draft or pay order or banker’s cheque of an amount aggregating to more than Rs. 50,000 in a financial year.
14.	Payment as life insurance premium to an insurer as defined in section 2(9) of the Insurance Act, 1938.	Amount aggregating to more than Rs. 50,000 in a financial year.
15.	A contract for sale or purchase of securities (other than shares) as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956.	Amount exceeding Rs. 1,00,000 per transaction.
16.	Sale or purchase, by any person, of shares of a company not listed in a recognized stock exchange.	Amount exceeding Rs. 1,00,000 per transaction.
17.	Sale or purchase of any immovable property.	Amount exceeding Rs. 10,00,000 or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
18.	Sale or purchase, by any person, of goods or services of any nature other than those specified at Si. No. 1 to 17 of this Table, if any.	Amount exceeding Rs. 2,00,000 per transaction:

1. Where a person, entering into any transaction referred to in this rule, is a minor and who does not have any income chargeable to income-tax, he shall quote the permeant account number of his father or mother or guardian, as the case may be, in the document pertaining to the said transaction.

2. Any person who does not have a permanent account number and who enters into any transaction specified in this rule, he shall make a declaration in Form No.60 giving therein the particulars of such transaction either in paper form or electronically under the electronic verification code in accordance with the procedures. data structures, and standards sped tied by the Principal Director General of Income Tax (Systems) or Director General of Income Tax (Systems).

3. The provisions of this rule shall not apply to the following class or classes of persons, namely—

(i) the Central Government. the State Governments and the Consular Offices

(ii) the non-residents referred to in clause (30) of section 2 of the Act in respect of the transactions other than a transaction referred to at Sl. No. 1 or 2 or 4 or 7 or 8 or 10 or 12 or 14 or 15 or 16 or 17 of the Table.

4. A person who has an account (other than a time deposit referred to at S.No. 12 of the Table and a Basic Saving Bank Deposit Account) maintained with a banking company or a cooperative bank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) and has not quoted his permanent account number or furnished Form No. 60, as the case may be, at the time of opening of such account or subsequently, he shall furnish his permanent account number or Form No. 60, as the case may be, to the person specified in clause (c) of sub-rule (1) of rule 114C on or before the 28th day of February. 2017.

Explanation. —For the purposes of this rule, —

(1) “payment in connection with travel” includes payment towards fare, or to a travel agent or a tour operator, or to an authorized person as defined in clause (c) of section 2 of the Foreign Exchange Management Act, 1999;

(2) “travel agent or tour operator” includes a person who makes arrangements for air, surface or maritime travel or provides services relating to accommodation, tours, entertainment, passport, visa, foreign exchange, travel related insurance or other travel related services either severally or in package;

(3) “time deposit” means any deposit which is repayable on the expiry of a fixed period.

3. Who has to apply for PAN ? [Section 139A(1)]

According to Section 139A(1) of the Income Tax Act, 1961, the following individuals are required to apply for a Permanent Account Number (PAN):

Individuals

All individuals, including citizens of India as well as foreign nationals residing in the country, are required to apply for PAN if they fall under any of the following categories:

Having taxable income in India : This means that if your total income, or the total income of any person for whom you are responsible, exceeds the basic exemption limit, you must apply for a PAN. The basic exemption limit for the financial year 2023-24 is ₹5 lakh for individuals under 60 years old, ₹3 lakh for individuals between 60 and 80 years old, and ₹2.5 lakh for individuals over 80 years old.
Engaging in any business or profession that requires them to file an income tax return
Applying for a credit card with a limit exceeding a specified amount
Opening a bank account, except for Basic Savings Bank Deposit Accounts (BSBDA)
Investing in securities, mutual funds, or debentures
Buying or selling immovable property valued above a certain threshold
Applying for a loan exceeding a specified amount
Applying for a passport
Receiving a pension or any other income subject to tax deduction at source (TDS)

Companies and Entities

Companies and entities, whether registered in India or abroad, must obtain a PAN if they are involved in any financial transactions within India. This includes:

Companies incorporated under the Companies Act, 2013
Partnership firms
Trusts
Associations of persons (AOPs)
Body of individuals (BOIs)
Artificial juridical persons
Local authorities
Statutory bodies
Hindu Undivided Families (HUFs)

Specified Financial Transactions

There are a number of specified financial transactions in which quoting of PAN is mandatory. These include:

Sale or purchase of a motor vehicle or vehicle other than two-wheeled vehicles
Sale or purchase of immovable property
Opening an account with a bank or financial institution
Opening a demat account with a stockbroker
Making a payment of ₹2.5 lakh or more in a single transaction for goods or services
Making a payment of ₹1 lakh or more in a single transaction for travel expenses
Making a payment of ₹50,000 or more in a single transaction for hotel bills
Making a payment of ₹10,000 or more in a single transaction for jewelry
Making a payment of ₹5,000 or more in a single transaction for cash withdrawals from a bank account

Exceptions

There are a few exceptions to the requirement of obtaining a PAN. The following individuals or entities are not obligated to apply for PAN:

Non-resident individuals or entities who do not engage in any financial transactions in India
Individuals whose income is exempt from tax under the Income Tax Act
Central and state government departments, except when they engage in financial transactions subject to TDS
Consular offices of foreign countries
Specified institutions, such as the Reserve Bank of India, Securities and Exchange Board of India, etc.

4. Application for Allotment of Permanent Account Number (PAN) [Rule 114(1) & (2)]

Form for application [Rule 114(1)]:

An application under section 139A(1) or section 139A(1A) or section 139A(2) or section 139A(3) for allotment of a permanent account number shall be made in Form No. 49A or 49AA, as the case may be.

Provided that an applicant may apply for allotment of permanent account number through a common application form notified by the Central Government in the Official Gazette, and the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the classes of persons, forms and formats along with procedure for safe and secure transmission of such forms and formats in relation to furnishing of permanent account number.

To whom the application is to be made [Rule 114(2)]:

An application referred to in rule 114(1) shall be made,—

in case where the function of allotment of permanent account number under section 139A has been assigned by the Chief Commissioner or Commissioner to any particular Assessing Officer, to that Assessing Officer;
in any other case, to the Assessing Officer having jurisdiction to assess the applicant.

5. Time Limit for Submitting Application for allotment of PAN [Rule 114(3)]

Situation	Time limit for a making application
1. If his total income or the total income of any other person in respect of which he is assessable under this Act during any previous year exceeded the maximum atnount which is not chargeable to income-tax.	on or before 31st May of the assessment year in which such income is assessable
2. If he is carrying on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed 5,00,000 in any financial year.	on or before the end of that financial year
3. If he is required to furnish a return of income under section 139(4A). i.e. return of trust and charitable institutions,	on or before the end of the relevant financial year
4. In the case of a person who is entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (relating to TDS) in any financial year.	on or before the end of such financial year
5. If he is a person who is not required to apply for PAN under any of the above clauses	application can be made at any time

6. PAN to be quoted in certain cases [Section 139A(5)]

In India, the Permanent Account Number (PAN) is a unique ten-digit alphanumeric identifier issued by the Income Tax Department. It is essential for various financial transactions and acts as a vital tool for the government to track and monitor taxable transactions. The PAN is required to be quoted in specific cases as per Section 139A (5) of the Income Tax Act, 1961.

Quoting PAN in Specified Transactions

Section 139A (5) of the Income Tax Act mandates the quoting of PAN in certain transactions to ensure transparency and accountability. Let's take a look at the scenarios where PAN is required to be quoted:

(i) Sale or purchase of a motor vehicle or vehicle other than two-wheeled vehicles:

This includes the sale or purchase of any motor vehicle, whether new or used, that requires registration by a registering authority under Chapter IV of the Motor Vehicles Act, 1988.

(ii) Opening an account (other than a time-deposit) with a banking company or a co-operative bank:

This includes opening any kind of bank account, except time deposits, with a banking company or a co-operative bank.

(iii) Making a payment of ₹2.5 lakh or more in a single transaction for goods or services:

This includes any payment made in excess of ₹2.5 lakh in a single transaction for goods or services, regardless of whether the payment is made in cash or by cheque, demand draft, or other mode of payment.

(iv) Making a payment of ₹1 lakh or more in a single transaction for travel expenses:

This includes any payment made in excess of ₹1 lakh in a single transaction for travel expenses, such as airfare, hotel bills, and travel insurance.

(v) Making a payment of ₹50,000 or more in a single transaction for hotel bills:

This includes any payment made in excess of ₹50,000 in a single transaction for hotel bills, including room rent, food, and other incidental charges.

(vi) Making a payment of ₹10,000 or more in a single transaction for jewellery:

This includes any payment made in excess of ₹10,000 in a single transaction for jewellery, whether precious stones or other precious metals.

(vii) Making a payment of ₹5,000 or more in a single transaction for cash withdrawals from a bank account:

This includes any cash withdrawal made in excess of ₹5,000 in a single transaction from a bank account, whether through an ATM, a bank counter, or other mode of withdrawal.

(viii) Quote PAN while filing an income tax return:

Every taxpayer who is liable to file an income tax return is required to quote their PAN in the return.

(ix) Quote PAN while submitting documents to the Income Tax Department:

Every person who is required to submit documents to the Income Tax Department, such as Form 16, Form 15G/15H, or Form 13A, is required to quote their PAN on the documents.

(x) Quote PAN while making investments:

Every person who is making investments in certain specified securities or financial products, such as mutual funds, securities, insurance policies, and bonds, is required to quote their PAN.
Failure to quote PAN in these specified transactions can result in a penalty of ₹10,000 under Section 272B of the Income Tax Act. Therefore, it is crucial for individuals and businesses to be aware of the PAN quoting requirements and comply with them to avoid penalties.

Importance of quoting PAN

The requirement to quote PAN in specified transactions serves several purposes:

Prevention of tax evasion: By mandating the use of PAN, the government can track high-value transactions and identify individuals who may be evading taxes. This helps in ensuring that everyone contributes their fair share towards the nation's development.
Enhanced financial transparency: Quoting PAN in financial transactions promotes transparency and accountability. It enables the government to monitor and regulate economic activities, reducing the scope for illegal activities such as money laundering and black money generation.
Verification of identity: PAN acts as a reliable proof of identity, helping financial institutions and regulatory authorities verify the authenticity of individuals involved in financial transactions. It aids in preventing fraud and identity theft.
Streamlining tax administration: The use of PAN simplifies tax administration by providing a unique identification number for each taxpayer. It facilitates the efficient processing of tax returns, refunds, and other tax-related matters.

Consequences of non-compliance

Failure to quote PAN in the specified transactions can lead to various consequences:

Rejection of applications: Banks and financial institutions may reject applications for bank accounts, credit cards, or loans if PAN details are not provided.
Imposition of penalties: The Income Tax Department has the authority to impose penalties for non-compliance with PAN requirements. These penalties can range from monetary fines to legal repercussions.
Difficulty in financial transactions: Non-compliance with PAN requirements may result in difficulties in conducting certain financial transactions, such as buying or selling securities or property.
Increased scrutiny: Individuals who fail to quote PAN in specified transactions may attract increased scrutiny from tax authorities, leading to audits and investigations.

7. Aadhaar Number to be intimated [Rule 114(5)] by every person who has been alloted PAN :

Every person who has been allotted permanent account number as on the 1st day of July, 2017 and who in accordance with the provisions of subsection (2) of section 139AA is required to intimate his Aadhaar number, shall intimate his Aadhaar number to the Principal Director General of Income-tax (Systems) or Director-General of Income-tax (Systems) or the person authorised by the said authorities.

PDGIT or DGIT (Systems) to specify the formats and standards alongwith procedure, for the verification of documents [Rule 114(6)]:

The Principal Director General of Income-tax (Systems) or Director-General of Income-tax (Systems) shall specify the formats and standards alongwith procedure, for the verification of documents filed with the application under sub-rule (4) or intimation of Aadhaar number in sub-rule (5), for ensuring secure capture and transmission of data in such format and standards and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing of the application forms for allotment of permanent account number and intimation of Aadhaar number.