Permanent Account Number or PAN is a ten-digit alphanumeric number issued by the Income Tax Department of India. PAN is issued to all taxpayers in India.
Let’s take a look at the documents required to get your PAN card. If you are an individual applying for a PAN, you need Proof of Identity and Address. This could be Aadhaar, Passport, Voter ID and Driving License. If it’s a HUF (Hindu Undivided Family), you need an affidavit of the HUF, issued by the head of the HUF along with POA details.
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It’s compulsory to link PAN with Aadhaar to file ITR. Now, under Section 139AA(2) your PAN is deemed ‘invalid’ if you fail to intimate the Aadhaar Number and link PAN with Aadhaar. Your PAN Card is deemed, ‘inoperative’.
Note: PAN is invalid if it’s not linked to Aadhaar by September 30th.
Let’s say you have hired a contractor to construct your home. Perhaps, a designer, architect or any other professional to beautify your house. According to new PAN rules, you must deduct TDS, before making the relevant payment. You then deposit the TDS with the Government using the PAN of the professional. (Architect/Contractor).
What are the Current Rules? You are not required to deduct TDS on any payment made to a contractor if it’s for personal use. If you are carrying out business or profession, not subject to an audit, there’s no need for TDS to be deducted. These rules are being exploited.
New Rules: There’s a new Section 194M proposed in Budget 2019. TDS is levied at 5% on money paid for contractual work or professional fees. This is only if the amount exceeds Rs 50 Lakhs a year. However, you must deposit TDS against your PAN Card and the professional’s PAN Card. There’s no need to obtain TAN (Tax Deduction Account Number).
Let’s say you have income exceeding basic exemption limit, you are filing ITR, or have business turnover exceeding Rs 5 Lakhs, then holding PAN is compulsory.
Now, several people who make high value transactions like buying foreign currency or high withdrawals from banks; do not hold a PAN.
After Budget 2019, there’s a proposal to insert the new clause (vii) in Section 139A(1). This means each person who plans to enter certain prescribed transactions and has not been allotted a PAN; must apply for one.
Link PAN to Aadhaar, before filing ITR. However, if you don’t have PAN, Budget 2019 has proposed inter-changeability between PAN and Aadhaar.
According to this proposal, if you are required to furnish, intimate or quote PAN under this act, and you are not allotted a PAN, but you have the Aadhaar Number, you could quote, intimate or furnish Aadhaar instead of PAN.
While filing ITR you need the PAN. But going forward, you may quote Aadhaar instead of PAN.
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