Until recently, an individual was required to furnish PAN number for transactions or investments beyond a specified limit. However, the most recent regulation from the government has mandated submission of PAN for any transaction about Rs 2 lakh. The move is aimed to contain black money circulation in the economy.
The rule that has become effective from January 2016 will cover each and every transaction, right from high-end electronic gadgets to gold jewellery purchase. With the implementation of the new guidelines, it is important for an individual to take note of certain implications of such scheme.
What the rule states?
Any cash purchase of Rs 50,000 and above, gold purchase of Rs 200,000, alongside fixed deposits in non-banking finance companies, post offices, Nidhis will now require PAN. At the same time, the government has raised the limit for certain transactions such as foreign travel or payment for restaurant or hotel bill to Rs 50,000. The earlier limit for such transactions was Rs 25,000.
What is the objective?
The whole objective of introducing this rule is to keep a tab on an individual’s spending, which should fall in line with his/her earnings. If a disparity between the declared income of the individual and his expenses is noticed then such an individual will come under the scanner of the income tax department. This means that taxmen can act if expenses are higher than the income earned during a financial year. For instance, if an individual has declared an income of Rs 10 lakh but has spent close to 15 lakhs through purchases or investments then such person can be inquired by the tax officials.
What care should be taken?
From now on one must be careful while quoting PAN as any transaction containing the PAN will be linked to that of the PAN holder even if it is not true. For instance, a corporate lunch bill of over Rs 50,000 at a hotel will need PAN submission. In such a case, if any one individual submits the PAN then the whole transaction will be linked to the Pan-holder instead of viewed as a corporate expenditure. Hence, such instances should be kept in mind from now on.