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PAN likely to turn must for all financial dealings
February, 19th 2007

Investors may soon have to quote PAN (permanent account number) for all financial transactions, irrespective of the quantum of investment. PAN is set to become the common business number for all transactions in the financial sector, ranging from equities to debt, in the first stage. Small savings schemes may be covered in the second stage.

According to senior officials, the government is considering a proposal to make PAN compulsory for all investments, irrespective of the size, so that all transactions can be monitored and later matched with the tax payers returns. PAN is a 10-digit alphanumeric number issued by the income-tax department and each individual has to quote this number in his I-T return.

Individuals also have to quote their PAN in select financial transactions, especially high-value investments. For instance, quoting PAN is a must for investments of Rs 50,000 and above in initial public offerings (IPOs) and mutual funds, going by Sebis issue procedure. It is mandatory for investors opening a fixed deposit or a post office savings account of over Rs 50,000 to quote PAN. There is no such requirement in many of the small savings schemes.

All investors are income tax assesses. There may be a few investors who are out of the tax net and do not hold a PAN. Making PAN mandatory for all investments, irrespective of the size, will enable tax authorities to establish a clear audit trail, said officials. Last year, for instance, Sebi made it mandatory for investors who have a trade order value of less than Rs 5 lakh to quote their PAN or the unique identification number obtained under the MAPIN.

All those investors transacting a trade order of Rs 5 lakh or more need a UIN. It was reckoned that dovetailing PAN with MAPIN will help in tracking the source of tax evaders.

Similarly, PAN has been made compulsory for investors who trade in derivatives on the BSE or the NSE and get tax breaks. Eventually, every financial transaction will be linked to PAN. Already, agencies filing annual information returns such as banks, credit card companies, mutual funds, registrar of properties have to give their clients PAN.

The tax information network (TIN) hosted by the NSDL captures this data and creates individual ledger statements. The ITS in turn is matched with the tax payers return to check if he has shortpaid or evaded taxed. Eventually, all transactions that are covered under the AIR will automatically come in the PAN basket.

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