In another step to keep closer tabs on financial transactions and curb black money transactions, the government is planning to make quoting the permanent account number (PAN) mandatory for all transactions carried out by customers with their banks and insurance companies.
Currently, quoting the PAN is not mandatory for opening a bank account or buying an insurance policy. Cash deposits of below Rs 50,000 at banks do not require the PAN to be quoted either.
This threshold limit will also be done away with once the government implements the new measures. In addition, existing bank account-holders will need to quote PANs.
The notification to make PAN mandatory for all bank and insurance customers will come before December 31 this year, said a finance ministry official, requesting anonymity. India has about 500 million bank accounts and roughly 54 million PANs have been issued.
As recently as July 2 this year, the government made PAN disclosure mandatory for all security market participants, including mutual fund investors, of any size. Quoting this alpha-numeric number is already mandatory for a host of transactions, including on return of income and all correspondence with any income tax authority.
It is also compulsory to quote PAN in all documents pertaining to financial transactions, including sale and purchase of immovable property (Rs 5 lakh and above) or payments in cash of amounts exceeding Rs 25,000 to hotels and restaurants.
Likewise, PAN has to be mentioned for making a time deposit exceeding Rs 50,000 with a bank or post office. Anyone who pays an insurance premium of Rs 50,000 needs to quote the PAN.
The new measures will also remove any bias people may have towards a financial product by making PAN mandatory for nearly all major financial transactions.
Even as the scope of PAN requirement is being extended, the Association of Mutual Funds in India has been lobbying the government to scrap the PAN requirement imposed on mutual fund transactions, saying the industry is suffering as a result.
Where PAN is mandatory
Sale or purchase of immovable property valued at Rs 5 lakh or more
Sale and puchase of vehicles excluding two wheelers
Fixed deposits, post office savings of Rs 50,000
Bank drafts of Rs 50,000
All security market participants
Income tax returns
Challans for payment of direct taxes
All correspondence with the income tax department
Where PAN is mandatory, but not strictly implemented
Application for opening a bank account
Installation of a telephone connection (including a cellular telephone)
Acquisition of credit cards
Payment to hotels & restaurants against bills exceeding Rs 25,000