Most people consider PAN (Permanent Account Number) as a document required only for filing Income Tax Returns (ITR), but in reality its use is mandatory for many major financial transactions also. From opening a bank account to buying property and investing in shares, there are many tasks where giving PAN number is necessary.
According to experts, through PAN, the Income Tax Department keeps an eye on major financial transactions and ensures that the records of a person’s income and expenses are recorded correctly.
Giving PAN is mandatory in these 5 transactions
Under the current rules, there are some major financial transactions in which giving PAN number is mandatory.
- Purchase or sale of property worth more than Rs 20 lakh.
- Purchase of goods or services worth more than Rs 2 lakh in one go.
- Buying and selling of unlisted shares worth more than Rs 1 lakh.
- Purchase of a car or motorcycle worth more than Rs 5 lakh.
- Opening a demat account or investing in certain financial instruments.
The record of these transactions can reach the Income Tax Department and is linked to the financial profile of the taxpayer.
Can notice be issued for not giving PAN?
In many cases giving PAN is legally mandatory. If a person does not provide PAN, the concerned entity may refuse to proceed with the transaction.
When PAN is given in a transaction, its information can be recorded on platforms like TDS, TCS, Statement of Financial Transactions (SFT) and Annual Information Statement (AIS). If a discrepancy is found between a person’s declared income and his major financial transactions, the Income Tax Department may seek clarification.
Penalty will be imposed for giving wrong PAN
According to the rules, a fine of up to Rs 10,000 can be imposed for giving wrong or fake PAN number. Apart from this, problems like difficulty in getting tax credit, irregularities in records and additional investigation by the Income Tax Department may also arise.
Therefore, special care should be taken while entering PAN number in any financial or tax related document.
How does the Income Tax Department monitor?
PAN acts as a unique identification number in the entire tax system. Information like bank deposits, property purchase and sale, mutual fund investment, stock market transactions and foreign money transfer are linked to PAN.
The Income Tax Department analyzes this information with the help of data analytics and modern technologies. If a big difference is seen between the income and expenditure of a person, the department can ask for information by sending a notice. Therefore, it is very important to follow the rules related to PAN and give correct information.
