When depositing or withdrawing more than Rs 20 lakh in a financial year or opening a current account, the government has made it compulsory to provide either PAN or Aadhaar.
According to a notification issued by the Central Board of Direct Taxes (CBDT), providing the Permanent Account Number (PAN) or biometric Aadhaar will be required for such high-value deposits or withdrawals from banks in a financial year, as well as the opening of a current account or cash credit account with a bank or post office.
Sandeep Sehgal, an AKM Global Tax Partner, said the move will offer more information to financial activities by requiring banks, post offices, and co-operative societies to declare deposits and withdrawals totaling Rs 20 lakh or more in a financial year.
Furthermore, the requirement of acquiring a PAN for deposits and even withdrawals would aid the government in tracking cash movement in the system.
Overall, with the existing TDS provision u/s 194N under the Income-tax Act of 1961, it would restrict the entire process of suspicious cash inputs and withdrawals.
For income tax purposes, PAN and Aadhaar are currently interchangeable. In all correspondence with the IT department and while engaging in certain financial activities, an assessee must include his or her PAN.
However, it is possible that a person who engages in high-value transactions, such as the purchase of foreign currency or large bank withdrawals, may not have a PAN.
PAN and Aadhaar cards can now be used interchangeably, thanks to the Finance Act of 2019.
Every person who is obliged to supply or cite his PAN under the Income Tax Act and who has not been assigned a PAN but has an Aadhaar number may provide the biometric ID instead of the PAN. According to Shailesh Kumar of Nangia & Co LLP, once a person provides the PAN, the tax authorities will have an easier time tracking the transactions.
The government has been working hard to expand its tax base in order to bring people into the tax net who may be making substantial transactions but do not have a PAN, Kumar added. When someone tries to avoid submitting an income tax return, it might become problematic.
