PAN made Mandatory for Cash Deposits
PAN or Permanent Account Number was introduced and assigned to each person as a means to bring all financial information about that person at a single place, be it transactional or taxational. This unique 10-digit number acts as a centralised storage system for all information related to the transactions carried out by him everywhere, which is gold to the Income Tax Department. It became crucial to declare a list of PAN mandatory transactions in order to keep a check on tax evasion.
New amendment relating to PAN
The Tax Department vide notification dated 10th May, 2022 has inserted a new rule which specifies the limit for deposits and limit for withdrawal, exceeding which makes PAN mandatory. The PAN rule on cash deposits and withdrawals state that if any person:
- Makes cash deposits aggregating to Rs. 20 lakhs or more in a financial year, in one or more of his accounts,
- Withdraws cash more than or equal to INR 20 lakhs in a financial year, from one or more of his accounts,
- Opens a current account or cash credit account,
in a Banking company or a Cooperative bank or a Post office, he shall be required to apply for allotment of PAN at least 7 days before entering into such transactions.
This rule is a step towards making quoting PAN on bank deposits mandatory, when it goes beyond the ceiling limits mentioned above. NRIs dealing in cash will find it extremely important to apply for PAN at the earliest. Failure to comply with the provisional requirements of PAN may attract penalty.
PAN is normally required to be presented for different transactions as prescribed by the Tax Department such as:
- Purchase/Sale of Motor vehicles
- Opening DEMAT account
- Payments in Cash and otherwise, when exceeding INR 50,000
Opening Bank Accounts
- Purchase/Sale of Immovable property
- Sale/Purchase of Shares
- Filing of Income Tax returns
Did NRIs otherwise need PAN?
An NRI is mandatorily required to have a PAN in certain scenarios as mentioned below:
- Has taxable income from sources in India
- Has plans to engage in share trading
- Has plans to invest in Mutual funds
- Purchase of Immovable property in India
Until recently, these were the only scenarios that pushed an NRI to obtain a PAN. However, with recent updates in rules, it has become clear that all NRIs need to file Income Tax returns irrespective of whether they have taxable income that year. This automatically makes it mandatory for all NRIs to apply for PAN.
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