In India, the Permanent Account Number (PAN) is a ten-digit alphanumeric identifier issued by the Income Tax Department. While quoting PAN is often advisable in financial dealings, it is mandatory in specific transactions under Rule 114B of the Income Tax Rules, in accordance with Section 139A(5)(c) of the Income Tax Act.
This blog aims to provide a detailed explanation of when and where PAN must be quoted, especially focusing on the transactions listed under Rule 114B. By the end, you will have a clear understanding of compliance requirements and the importance of PAN in ensuring financial transparency and avoiding penalties.
Why Is PAN Important?
PAN serves as a universal identification key for all financial transactions and helps the Income Tax Department in tracking tax evasion. It is required for:
- Filing Income Tax Returns
- Opening bank accounts
- High-value financial transactions
- Investing in securities
- Property dealings, and more
To curb the misuse of funds and maintain a robust financial tracking mechanism, the government has specified certain transactions where quoting of PAN is mandatory.
Rule 114B: Transactions Where PAN Is Mandatory
As per Rule 114B, PAN must be quoted in the documents pertaining to the following transactions:
| Sl. No. | Nature of Transaction | Value Threshold |
| 1 | Sale or purchase of a motor vehicle (except two-wheelers) | All such transactions |
| 2 | Opening an account (other than time deposit and Basic Savings Bank Deposit Account) with a bank or co-operative bank | All such transactions |
| 3 | Applying for a credit or debit card | All such transactions |
| 4 | Opening of a demat account with a depository or custodian of securities | All such transactions |
| 5 | Hotel or restaurant bill payment | Payment in cash exceeding ₹50,000 at one time |
| 6 | Foreign travel or currency purchase | Payment in cash exceeding ₹50,000 at one time |
| 7 | Payment to a Mutual Fund | Exceeding ₹50,000 |
| 8 | Purchase of debentures or bonds from a company or institution | Exceeding ₹50,000 |
| 9 | Purchase of bonds from RBI | Exceeding ₹50,000 |
| 10 | Cash deposits in bank or post office | > ₹50,000/day or > ₹2,50,000 (Nov 9–Dec 30, 2016) |
| 11 | Purchase of bank drafts/pay orders/banker’s cheques | Payment in cash > ₹50,000/day |
| 12 | Time deposit in banks, NBFCs, Nidhi companies, Post Office | > ₹50,000 or total > ₹5,00,000/year |
| 13 | Pre-paid instruments like wallets | Aggregate > ₹50,000/year |
| 14 | Life insurance premium payment | Aggregate > ₹50,000/year |
| 15 | Contract for sale/purchase of securities (other than shares) | Amount > ₹1,00,000 |
| 16 | Sale/purchase of unlisted shares | Amount > ₹1,00,000 |
| 17 | Sale/purchase of immovable property | Amount or stamp duty value > ₹10,00,000 |
| 18 | Sale/purchase of any goods or services (not listed above) | Transaction value > ₹2,00,000 |
Special Provisions Under Rule 114B
1. Minors
If the person entering into the transaction is a minor without taxable income, the PAN of the parent or guardian must be quoted.
2. Form 60 Declaration
In case a person does not have a PAN, they must furnish a declaration in Form 60. This can be submitted either:
- In physical form, or
- Electronically using an electronic verification code (EVC).
Form 60 must include details of the transaction and identity/address particulars.
3. Foreign Companies in IFSC Units
Foreign companies that:
- Do not have income taxable in India, and
- Do not have a PAN,
can submit Form 60 for transactions related to opening an account or time deposit in IFSC (International Financial Services Centre) banking units.
Exempted Entities
Certain entities are exempt from quoting PAN, even for transactions listed above:
- Central and State Governments
- Consular Offices
- Non-residents (defined under Section 2(30) of the Income Tax Act), except for transactions listed under Sl. No. 1, 2, 4, 7, 8, 10, 12, 14, 15, 16, and 17.
This means NRIs making high-value hotel payments or purchasing goods above ₹2 lakh may not need to quote PAN, but must quote PAN when investing in securities, mutual funds, or purchasing property.
Penalties for Non-Compliance
Failure to quote PAN in the specified transactions can attract a penalty under Section 272B of the Income Tax Act. The penalty may extend to ₹10,000 for each default. Moreover, banks and financial institutions may refuse to process transactions if PAN/Form 60 is not provided.
Impact on Financial Institutions
Banks, mutual funds, insurance companies, and NBFCs are required to ensure that PAN is quoted and validated. They are also responsible for:
- Collecting Form 60 where PAN is not available
- Ensuring compliance with Know Your Customer (KYC) norms
- Reporting high-value transactions to the Income Tax Department
Practical Scenarios Where PAN Is Often Missed
Despite clear mandates, there are areas where people unintentionally skip quoting PAN:
- Buying jewellery worth over ₹2 lakh (covered under goods and services)
- Paying large school/college donations or fees
- Making cash deposits exceeding the threshold
- Purchasing high-value home appliances or electronics
In such cases, failure to quote PAN can result in a red flag during audits or scrutiny by tax authorities.
Final Words
The Government of India, through Rule 114B, has laid down a comprehensive list of transactions where quoting PAN is not just advisable but mandatory. Whether you are an individual, a business, or a foreign entity operating in India, it is crucial to understand these provisions and ensure compliance.
If you don’t have a PAN and still wish to complete a high-value transaction, don’t forget to furnish Form 60. And if you’re a minor or a non-resident, check whether your specific transaction qualifies for an exemption.
