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Now, PAN or Aadhaar mandatory for cash deposits or withdrawals above Rs 20 lakh

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New Delhi, May 12: The government has made quoting of PAN or Aadhaar number mandatory if the cash deposits and withdrawals in a financial year exceeds Rs 20 lakh and in case of opening of current account or cash credit account with a bank.

The Central Board of Direct Taxes (CBDT) has issued a notification on May 10, 2022 for the same. The new rules will be effective from May 26, 2022.

Now, PAN or Aadhaar mandatory for cash deposits or withdrawals above Rs 20 lakh

Commenting on the move, AKM Global Tax Partner Sandeep Sehgal said this shall bring in more transparency to financial transactions where banks, post offices and co-operative societies would be required to report the transactions of deposits and withdrawals aggregating to Rs 20 lakh or more in a financial year.

"Further, the mandatory condition of obtaining PAN for deposit and even for withdrawals would help the government in tracing the movement of cash in the system. All in all, this would tighten the entire process of suspicious cash deposits and withdrawals with the already present TDS provision u/s 194N under the Income-tax Act, 1961," Sehgal said.

As per the notification, "Every person shall, at the time of entering into a transaction specified in column (2) of the Table below, 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 notification further states, "The permanent account number or Aadhaar number along with 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.''

As per the notification, every person to obtain and quote Permanent Account Number ("PAN"), wherein he enters into any of the following transactions:

  • Cash deposits aggregating to Rs 20 lakhs or more in the financial year in one or more accounts with a bank or a post office.
  • Cash withdrawal or withdrawal aggregating to Rs 20 lakhs or more in the financial year in one or more accounts with a bank or a post office.
  • Opening of current account or cash credit account with a bank

Currently, PAN and Aadhaar are interchangeable for income tax purpose.

An assessee needs to mention his/her PAN in all communications with the I-T department and while entering into specified financial transactions.

However, there can be situations where a person entering into high-value transactions, such as purchase of foreign currency or huge withdrawal from banks, does not possess a PAN.

The Finance Act, 2019, has provided for interchangeability of PAN with Aadhaar.

It has been provided that every person who is required to furnish or quote his PAN under the Income Tax Act, and who has not been allotted a PAN but possesses the Aadhaar number, may furnish the biometric ID in lieu of PAN.

Nangia & Co LLP Partner Shailesh Kumar said once such person quotes the PAN it will be easier for the tax authorities to track the transactions.

"The government has constantly been striving to increase its taxpayer base to be able to bring such people under the tax net who may be entering into large transactions but do not hold a PAN," Kumar said.

It may eventually become difficult where a person tries to avoid filing return of income, he added.

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