To prevent tax evasion, the Income Tax department has changed PAN card rules with effect from 5 December making it mandatory for all entities doing business worth over Rs 2.5 lakh in a financial year to have a Permanent Account Number. According to a new notification issued by the Central Board of Direct Taxes, all entities which made financial transactions of at least Rs 2.5 lakh in a financial year must apply for a PAN card till May 31 of the next financial year.
5 things to know about new PAN card rules:
1. “In the case of a person, being a resident, other than an individual, which enters into a financial transaction of an amount aggregating to two lakh fifty thousand rupees or more in a financial year and which has not been allotted any permanent account number, on or before the 31st day of May immediately following such financial year,” says the new amendment in Income Tax Rules, 1962.
2. The new income tax rule is not meant for individual taxpayers who are not associated with such entities.
3. The new I-T department notification also says that individuals like the managing director, director, partner, trustee, author, founder, karta, chief executive officer or office-bearer of such entities should also apply for a PAN card, in case they don’t have one, within 31 May of the next financial year.
4. “In the case of a person, who is the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office-bearer of the person referred to in clause (v) or any person competent to act on behalf of the person referred to in clause (v) and who has not been allotted any permanent account number, on or before the 31st day of May immediately following the financial year in which the person referred to in clause (v) enters into financial transaction specified therein,” reads the amendment.
5. Nangia Advisors LLP Partner Suraj Nangia said that now resident entities shall have to obtain PAN even if the total sales or turnover or gross receipts are not or are not likely to exceed Rs 5 lakh in a financial year. “This will help the income tax department track financial transactions, broaden the tax base and prevent tax evasion,” said the tax expert.
In another development, the Income Tax authorities have made it optional for individual tax payers to give their father’s name in PAN card application forms for those with single parents. If a PAN applicant’s father is deceased or separated, he or she can chose not to mention father’s name at all in the form.