From May 26 onwards, anyone depositing or withdrawing Rs 20 lakh or more from one or more bank accounts in a financial year will have to quote the Permanent Account Number (PAN) at the time of withdrawal.
With a view to curb evasion of taxes through the use of cash, the Central Board of Indirect Taxes (CBDT) has notified amendments to the Income Tax Rules that have made mention of PAN mandatory for those who make high deposits and withdrawals over the cash counter.
The same would apply while opening a current account. This rule is applicable to accounts which may already be linked to a PAN number.
New rules will be applicable from May 26.
NEW INCOME TAX RULES
- The government said that the measure is in sync with the policy to reduce the use of cash for transactions and the push for digital modes.
- The CBDT notified amendments in the Income Tax Rules, 1962 prescribing new transactions for obtaining and quoting PAN.
- The notification says, “the term transactions include deposit/withdrawal of cash amounting to Rs 20 lakh or more in a financial year through one or more bank accounts. Account(s) with not just commercial bank but even co-operative bank or post offices.”
- In the Budget for 2020, the Finance Ministry had introduced Tax Deducted at Source (TDS) on cash withdrawal in excess of Rs 20 lakh and this amendment to the rule has been added for specific transactions.
- With this, the government has put the onus of quoting the PAN and Aadhar details at the time of initiating a transaction both on the customer and financial institutions, which include a bank, co-operative bank and a post office .
- Sources say that the government will also come out with SOPs for the authentication of the PAN and Aadhaar.
- With this, there is yet another filter in place to ensure that everyone who operates a bank account gets a PAN to make cash transactions of Rs 20 lakh or more.
Interestingly, banks and other financial institutions now await a clarification from the government about how to deal with the rule in future as far as transactions made prior to May 26, 2022 deadline are concerned, since the financial year started in April.
The notification applied the PAN rule to “cash deposit or deposits aggregating to twenty lakh rupees or more in a financial year, in one or more account of a person with a banking company or a 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) or a Post Office.
It’s similarly applicable to “cash withdrawal or withdrawals aggregating to twenty lakh rupees or more in a financial year, in one or more account of a person with a banking company or a 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) or a Post Office.”
It says “every person shall, at the time of entering into a transaction specified in column, quote his permanent account number or Aadhaar number, as the case may be, in documents pertaining to such transaction, and every person specified in column (3) of the said Table, who receives such document, shall ensure that the said number has been duly quoted and authenticated —
The CBDT has prescribed that under the new rule the permanent account number or Aadhaar number alongwith demographic information or biometric information of an individual shall be submitted to the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) or the person authorised by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) with the approval of the Board, for the purposes of authentication referred to in section 139A.
The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall lay down the formats and standards along with procedure for authentication of permanent account number or Aadhaar number.