The Finance Ministry’s latest norms on mandatory quoting of permanent account number (PAN) will not adversely impact demand for financial products such as mutual funds, time deposits, shares, bonds and debentures, say tax experts and financial sector observers.
The new norms, aimed at widening the tax base and curbing generation of domestic black money, stipulate varying thresholds beyond which any purchase of financial products and instruments would require mandatory furnishing of PAN.
For instance, any time-deposit made with a bank, post office, nidhi or deposit taking NBFC, exceeding ₹50,000 or aggregating to over ₹5 lakh in a financial year would require mandatory furnishing of PAN.
Although the entire financial services sector had almost been earlier covered under PAN furnishing norms, the Central Board of Direct Taxes (CBDT) has now fine-tuned these.
Any purchase or sale of unlisted equity shares for amounts exceeding ₹1 lakh will now require furnishing of PAN, against ₹50,000 earlier.
The new norms also require PAN when an investor purchases bonds or debentures exceeding ₹50,000, mutual fund units exceeding ₹50,000 and insurance premium above ₹50,000.
Vikas Vasal, Partner-Tax, KPMG in India, said the latest norms should not cause any hardship to investors participating in financial services sector. “These requirements would only enhance governance and improve transparency in the financial sector,” Vasal told BusinessLine .
V Kannan, former Chairman and Managing Director of Vijaya Bank, said the latest norms would improve tax discipline and prevent people from bringing unaccounted money into the banking system.
Vineet Agarwal, Partner-Tax, KPMG in India, said the move would, over the medium-to-long term, have a positive impact on the government’s efforts to curb domestic black money. “In the coming days, there will be more proportion of people applying for PAN,” Agarwal said.
In India, the income tax base has remained at minuscule 3-4 crore for the past several years, despite the country’s population being over 125 crore.
In an apparent bid to widen the tax base, the Centre has, with effect from Friday, made PAN compulsory for cash transactions above ₹2 lakh, regardless of the mode of payment.
A PAN card will also be required for sale or purchase of immovable property touching ₹10 lakh and for hotel and restaurant bills of ₹50,000 or more.