PAN Card Holders: Big News! These financial transactions can be done even if the PAN card is inactive, know how

PAN Card Holders: Certain financial transactions can still be done if the PAN has become inoperative. However, these transactions will see a higher tax deduction at source (called TDS) and tax collection at source (called TCS).

Suresh Surana, founder, RSM India, a business consulting firm, says, “Section 206AA of the Income Tax Act, 1961, provides that in every transaction subjected to TDS, the tax deductor (payer of the income) would be liable to deduct tax at 20% provided no PAN is furnished by the tax deductee, which may be also due to PAN of the deductee being inoperative. Similarly, Section 206CC provides for a higher TCS at twice the rate specified or 5% (whichever is higher) in case of non-furnishing of PAN or furnishing of non-operative PAN. It is pertinent to note that the Budget 2023 has amended the Income Tax Act to provide that from July 1, 2023, the rate of TCS under Section 206CC shall not exceed 20% even if the individual has not furnished PAN.”

Financial transactions that can be done even if PAN is inoperative

The following monetary transactions that can be done – along with higher TDS or TCS – even if the PAN becomes inoperative are:

1. Receiving interest income from bank fixed deposits, recurring deposits in total interest exceeds Rs 40,000 (Rs 50,000 for senior citizens) in a financial year (higher TDS)
2. Receiving dividends from companies and mutual funds exceeding Rs 5,000 in a financial year (higher TDS)
3. Selling immovable property if the sale value or stamp duty value exceeds Rs 50 lakh per transaction (higher TDS)
4. Buying a car if the amount exceeds Rs 10 lakh (higher TCS)
5. Withdrawing money from EPF account if it exceeds Rs 50,000 and TDS is applicable (higher TDS)
6. Paying rent to landlord if monthly rental exceeds Rs 50,000 per month (higher TDS)
7. Selling goods and services if the amount exceeds Rs 50 lakh per transaction (higher TDS)
8. Making payments for contract work (such as hiring of interior designer) if it exceeds Rs 30,000 for single contract or Rs 1 lakh (higher TDS)
9. Receiving commission or brokerage payments exceeding Rs 15,000 (higher TDS)

Though there are many transactions under the Income Tax Act on which TDS is applicable. However, the above-mentioned transactions are common financial transactions which impact an individual every day.

Surana says, “Foreign remittances under the Liberalised Remittance Scheme (LRS) have set the TCS rate at 20% above the limit of Rs 7 lakh, except education and medical expenses. Further, with respect to purchase of an overseas tour programme up to Rs 7 lakh with effect from October 1, 2023, the rate would be 5%. Above that, it would be 20%. Hence, even if an individual has inoperative PAN, TCS at 20% will be applicable. However, in the case of education and medical expenses related remittances or purchase of overseas tour programmes up to Rs 7 lakh, TCS at the rate of 20% will be applicable even if the PAN is inoperative.”