Changes In The PAN Card Regulation To Curb Black Money
As per the new Income Tax Rules, this requirement of quoting PAN will be extended for opening accounts with banks including co-operative banks.
Photo Credit :
There has been a buzz in the media and finance circles recently with regard to the government's decision to introduce a new regulation wherein effective from 1st January 2016, quoting of PAN card number will be required for transactions of an amount exceeding Rs. 2 lakhs regardless of the mode of payment. As per the new Income Tax Rules, this requirement of quoting PAN will be extended for opening accounts with banks including co-operative banks.
People who do not hold PAN will be required to fill a form and furnish specified documents to establish their identity.
Of course, this move was in the offing as even in the Union budget of 2015, the Finance Minister, Arun Jaitley, had proposed that quoting of PAN would be made mandatory for sale and purchases of goods and services exceeding Rs 1 lakh. However, Rs. 1 lakh was considered as too small a threshold and therefore the same is increased to Rs 2 lakh.
We got in touch with Vaibhav Sankla, Director, H&R Block and he highlighted the below from the notification.
"The notification has specified some key changes to the existing rules. Some changed limits for payments where PAN needs to be quoted are as under:
" Sale or purchase of immovable property increased from Rs. 5,00,000 to Rs. 10,00,000
" Single bill payment in cash to hotels and restaurants increased from Rs 25,000 to Rs. 50,000
" Time Deposits with banking companies increased from Rs 50,000 to Rs 5,00,000
" Limit for purchase of jewellery decreased from Rs 5 lakh to Rs. 2 lakh
In addition, opening of Pradhan Mantri Jan Dhan Yojana accounts will also be exempt from this rule.
" With this move the government is likely to achieve the following:
" Widen its tax base
" Curb the circulation of black money and move towards a cashless economy
" Quoting PAN will help tax department to track all high-value transactions and also help to determine if it is in line with the declared income
However, one wonders if the implementation of this regulation will be effective. With a majority of all transactions in India being carried out in cash, the move to encourage a cashless economy should rather focus on providing incentives to credit transactions. As always, there will be loopholes to escape the regulation, primarily one being splitting the payment into two or three transactions to avoid the Rs 2 lakh net.
Industries like tourism and gems and jewellery are likely to most bear the brunt of this regulation and it is possible that the major players in these fields will suffer the most.
For salaried people, the regulation will have no major implications but they will need to be mindful of situations wherein cash component is likely to come into play, such as purchase of property or jewellery. Those businesses with legitimate cash income have nothing to fear but will have to deal with the added paperwork and will need to beef up accounting to comply with the regulation.
This regulation, with the intent of tracking high value transactions, has however kept the limit rather high at Rs 2 lakh, which will still automatically exempt purchases like high value smart phones, electronics, watches etc.
The regulation though, once it comes into force is likely to have far greater ramifications than just curbing of black money which is the government's primary intent. In the long term how it affects the economy remains to be seen.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.