Non-individual entities with high value transactions must apply for PAN by May 31
Non-individual entities who do not have a PAN and have conducted financial transactions worth more than Rs 2.5 lakh in the last fiscal, will have to apply for PAN before May 31. Even those managing financial transactions for non-individual entities will have to get PAN before the deadline. Not doing this before the deadline can attract a penalty.
Practising Chartered Accountant, Sachin Vasudeva says, “As per section 139A every person other than an individual, i.e., a company, trust, LLP, HUF etc. who is a resident of India as per the tax laws and who has entered into financial transaction of Rs 2.5 lakh or more in a financial year is required to apply for a PAN before May 31 of the relevant assessment year. The amendment to section 139A was made by the Finance Act 2018. The CBDT vide notification dated December 5, 2018 notified the aforesaid date of May 31. Thus, any person as specified above who has entered into a financial transaction of Rs 2.5 lakh or more during FY 2018-19 has to apply for a PAN number by May 31, 2019.”
The Central Board of Direct Taxes (CBDT) issued a notification on November 19, 2018 stating that non-individual entities which have conducted one or more transaction(s) of over Rs 2.5 lakh each in a fiscal year are mandatorily required to apply for PAN in case they do not possess one.
The notification issued by the CBDT clarified that the last date by which the above mentioned non-individual entity should apply for PAN is May 31. It also stated that in case of individual who is a director, partner, trustee, author, founder, Karta, chief executive officer principal officer or office bearer or any person competent to act on behalf of non-individual of Rs 2.5 lakh or more and has not applied for PAN, will also be required to apply for PAN on before May 31, 2019.
Applying of PAN in the above mentioned case is mandatory even if the entity is not required to file their income tax return (ITR) as per rules.
Vasudeva adds, “It is worthwhile to note that the term “Financial Transaction” has not been defined either in the Act or the Rules. If the said term is understood in common parlance, then every transaction having a monetary impact of Rs 2.5 lakh or more will get covered for this purpose; which means that transactions of simple sale/purchase will also get covered. The Board should, therefore, clarify the term financial transaction so as to avoid unnecessary litigation on this aspect.”
What will happen if these entities do not apply for PAN
If the above mentioned non-individual entities do not apply for PAN on or before May 31, 2019, then a penalty can be imposed on them for non-compliance.
Abhishek Soni, CEO, tax2win.in, a tax-filing firm says, “As per the current income tax laws, if a non-individual entity does not apply for PAN on or before the deadline of May 31, then the assessing officer can impose the penalty as mentioned under section 272B (1). The assessing officer can impose the penalty of Rs 10,000 for non-compliance of the Section 139A of the Income Tax Act.”
Vasudeva says, “Besides a penalty of Rs 10,000 which can be levied under section 272B of the Act, a person who does not have a PAN cannot undertake many transactions which are listed in Rule 114B of the Income-tax Rules, 1962. While the aforesaid Rule provides the option of filing form number 60 if PAN is not available, but the said form cannot be filed by a company or a firm.”
Rule 114B covers transactions such as sale or purchase of motor vehicle, opening an account with the bank other than a FD, opening of a DEMAT account, purchase of mutual funds, sale or purchase of immovable property etc.