From UPSC perspective, the following things are important :
Prelims level : Cap on cash withdrawal
Mains level : Tax evasion
The government has made requirement of a Permanent Account Number (PAN) or Aadhaar number for depositing or withdrawing Rs 20 lakh or more in a financial year or for opening a current account mandatory.
Regulating high-value transactions
- The Central Board of Direct Taxes, in a notification, said furnishing PAN or biometric Aadhaar will be mandatory for such high-value cash deposits or withdrawals from banks in a financial year.
- The same will be applied for opening of a current account or cash credit account with a bank or post office.
- Banks, post offices and co-operative societies would be required to report the transactions of deposits and withdrawals aggregating to Rs 20 lakh or more in a financial year.
- As of now, PAN is required to be furnished for cash deposits of Rs 50,000 or more in a day.
- With these rules, a threshold of Rs 20 lakh has been defined for the full financial year.
How will this help tax department?
- This move will help the government in tracing the movement of cash in the financial system.
- It is expected to help the income tax department monitor deposits/withdrawals where tax would not be getting paid by the individual otherwise on his or her income.
Why PAN-Aadhaar interoperability?
- The PAN-Aadhaar interoperability will help banks to record details for those who don’t have PAN.
- The interchangeable provision in the rules would allow a bank or financial institution to ask for Aadhaar in case an individual states that he or she doesn’t have PAN.
- The Finance Act, 2019, has provided for the interchangeability of PAN with Aadhaar.
- It has been provided that every person who is required to furnish or intimate or quote his PAN under the Income-tax Act.
- Those who, has not been allotted a PAN but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar in lieu of PAN.