Current Affairs

Issue

Permanent Account Number (PAN) or Aadhaar number has been made compulsory by the government for high-value cash withdrawal or deposit.

 

Background

The rules apply to withdrawal or deposit of cash amounting to Rs 20 lakh or more in a financial year.

 

Details

The move will help income tax department monitor high-value cash transactions, and deposits/withdrawals.

 

The rules

• The rules by CBDT apply to high-value cash deposits or withdrawals from banks in a financial year, or the opening of a current account or cash credit account with a bank or post office. 

• Financial institutions such as post offices and co-operative societies will be required to report deposits and withdrawals aggregating to Rs 20 lakh or more in a financial year.

• The current rules mandate furnishing PAN card if cash deposit of Rs 50,000 or more is made in a day. The new rules of Rs 20 lakh applies to whole financial year.

 

Significance

• The move of obtaining PAN for deposit and withdrawals can help the government in tracing the movement of cash in the financial system. 

• The existing loopholes in taxation system would be plugged along with the existing TDS deduction under Section 194N of Income Tax Act, 1961.

• The current TDS rules were introduced in Union Budget 2019 for tax deduction at source (TDS) on cash withdrawals exceeding Rs 1 crore.

 

Other benefits

• The Income Tax department can track financial transactions of agriculturists or the non-income taxpayers.

• The alternative option of Aadhar will help banks to record details for those who don’t have PAN.

• The Finance Act, 2019, has allowed for interchangeability of PAN with Aadhaar.