As per the new Permanent Account Number (PAN) card rules issued late last year, any resident entities that have made financial transactions worth Rs 2.5 lakh or more in the last fiscal will apply for a PAN card on or before May 31. The rule applies to all non-individual entities, be it a company, charitable trust, LLP, association of persons, body of individuals or Hindu Undivided Family (HUF).
This amendment to the Income Tax Rules, 1962, notified by the Central Board of Direct Taxes (CBDT) via a notification on November 19, 2018, specifies that any such entities that cross the Rs 2.5 lakh threshold in any financial year will have to apply for PAN latest by May 31 of the applicable assessment year.
The notification added that any person heading such entities that cross the financial transaction threshold in a year will also have to apply for PAN - if they have not been allotted one - by May 31 of the fiscal that follows. The list includes managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer, office bearer, or any person competent to act on behalf of such entities.
Not adhering to the rules will incur a penalty as mentioned under Section 272B (1). "The assessing officer can impose the penalty of Rs 10,000 for non-compliance of the Section 139A of the Income Tax Act," Abhishek Soni, CEO, tax2win.in, a tax-filing firm, told The Economic Times. In addition, without a PAN card entities cannot undertake transactions listed in Rule 114B of the Income-tax Rules. This includes, among others, opening an account with the bank other than a FD, opening of a DEMAT account, purchase of mutual funds, sale or purchase of immovable property and purchase/sale of motor vehicles.
Nangia Advisors LLP Partner Suraj Nangia previously told PTI that as per the new rules the resident entities will have to obtain PAN even if the total sales or turnover is not likely to exceed Rs 5 lakh in a financial year. He said that this will help the income tax department track financial transaction, broaden its tax base and prevent tax evasion.
However, according to Practising Chartered Accountant, Sachin Vasudeva, the CBDT notification leaves room for ambiguity since the term "financial transaction" has neither been defined in the Act nor in the Rules. He told the daily that if the said term is understood in common parlance, then every transaction having a monetary impact of Rs 2.5 lakh or more will get covered for this purpose, meaning that transactions of simple sale/purchase will also get covered. He further added that the CBDT should clarify the definition so as to avoid unnecessary litigation on this aspect.
With PTI inputs
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