In a recent notification, the Government of India has made it mandatory to quote PAN cards or Aadhar Card for transactions equal to or more than 20 lakhs in the current financial year.
Further in a notification, The Central Board of Direct Taxes (CBDT) said that there would be mandatory furnishing of Permanent Account Number (PAN) or Biometric Aadhaar for high-value deposits or withdrawals equal to or more than 20 lakhs from banks in a financial year. The same rule is also applicable for the opening of a current account or cash credit account with the post office or bank.
Speaking in appreciation of the move, AKM Global Tax Partner Sandeep Sehgal commented that this rule would be able to bring financial transparency to the transactions occurring in banks, post offices, and cooperative societies as these financial bodies have to report every deposit and withdrawal accounting to 20 lakhs or more in the financial year.
In addition to the above statement, Sandeep Sehgal also said that by making PAN cards and Aadhaar cards mandatory for transactions, the Government could trace the cash flow into the system very quickly. He also added that it is a great way to eliminate suspicious cash deposits and withdrawals. It would also tighten the rule of suspicious transactions, which is already present in TDS provision u/s 194N under the Income Tax Act,1961.
An assessee must mention PAN details in all his communications with the IT department, especially for specified financial transactions.
Currently, there is a provision by the Government which says PAN and Aadhaar are interchangeable for income tax.
The Financial Act 2019 has given the provision on the interchangeability of PAN and Aadhar for financial transactions.
The above provision is implemented because in many situations, when a person makes high-value transactions like huge withdrawals from banks or purchase of foreign currency, they do not possess a PAN card.
Hence, it is provided by the Government that people who are required to quote PAN under Income Tax Act and are not allotted a PAN card but have an Aadhaar card are allowed to furnish the biometric ID instead of PAN.
It will be very easy to track the transactions of such people once they quote their PAN, said Nangia and Co LLP Partner Shailesh Kumar.
Shailesh Kumar added that The Government of India has been putting consistent efforts to bring such people who make huge transactions but do not possess a PAN into the tax net to increase the taxpayer base in India.
Kumar also mentioned that it might become difficult in the future when a person tries to avoid filing a return of income.