The government has made it mandatory for the individuals to quote the Permanent Account Number (PAN) while deposition or withdrawal of an amount equal or more than Rs.20 lakh during the time of withdrawal from one or more bank accounts in a financial year. The Central Board of Indirect Taxes (CBDT) has taken this innovative decision to minimize tax evasion through the transaction of cash. CBDT has notified the said amendments regarding the inclusion of PAN number to the Income Tax Rules for those individuals who make huge amount of cash deposits and withdrawals over the cash counter.
The new rule introduced by the Central Board of Indirect Taxes (CBDT) of specifying the PAN number also applies while opening a new bank account. It is also applicable for those bank accounts which may have already been linked to a PAN number. The new rule is applicable from 26 May, 2022.
As per the new Income Tax Rules introduced by the government, the new measure is in synchronization with the policy. It would help to reduce the use of cash for the transactions and it would further promote the use of digital modes of transaction. The Central Board of Indirect Taxes (CBDT) has notified the proposed amendments in the Income Tax Rules, 1962. As per the new rules, obtaining and quoting the PAN number is mandatory while carrying out the new transactions. According to the notification pushed by the CBDT, the term transactions would include the deposition or withdrawal of cash equal or more than Rs.20 lakh in a financial year through one or more bank accounts. The rule applies to not just the commercial banks but also to the co-operative banks or post offices.
The Finance Ministry has introduced Tax Deducted at Source (TDS) in the Union Budget 2020. TDS will be applicable for cash withdrawals worth more than Rs.20 lakh. The amendment has been made some particular transactions. Along with this new amendment, the government has added this new Income Tax Rule of quoting the PAN number and the Aadhaar card details while carrying out a transaction. The rule applies at the time of initiating a transaction, both on the customer and financial institutions such as the commercial and co-operative banks, as well as post offices.
According to the statement obtained from the sources, the government will soon be introducing SOPs for verifying the authentication of the PAN and Aadhaar details of the individuals. It is anticipated that another layer of filter will be introduced soon by the government. The new mode of filter will be used for ensuring that the users, operating a bank account receives a PAN card so that they can make cash transactions worth Rs.20 lakh or more.
The banks and other financial institutions are now waiting for a new clarification made by the government regarding how to deal with the new rule. The financial year has started in April. Hence, the users are confused about how to follow the rule after May 26, 2022.