A year after declaring that PAN (permanent account number) would be made mandatory for all financial transactions,former Finance Minister P Chidambaram has decided to make it must for just insurance products that have an investment element of more than Rs 1 lakh per annum.
At the same time,he has decided that PAN be mandatory for opening a current account and not a savings account. PAN can be mandated for opening current accounts. However,for savings account,requirement of PAN should not be insisted upon as it would adversely impact financial inclusion initiatives, says a follow-up decision on Chidambarams 2008-09 Budget proposals.
In his Budget speech,Chidambaram had proposed to extend the requirement of PAN to all transactions in the financial market subject to suitable threshold exemption limits.
However,the action taken report to be laid in Parliament on February 16 says: It is proposed to mandate PAN for such insurance products that have an investment element in them,with exemption granted in cases where the contracted premium payable on such insurance policy does not exceed Rs 1 lakh.
Sources in the Ministrys Department of Financial Services said that they had written to Insurance Regulatory & Development Authority,Life Insurance Corp and General Insurers (Public) Sector Association to ensure compliance of the above norms on PAN for insurance products.
Initially,there was talk of PAN becoming compulsory for insurance policies,post office savings account or its savings certificates which did not require quoting of the 10-digit alphanumeric taxpayer identification number.
Besides an individual,banks,credit card companies etc are required to quote PAN of their clients in select financial transactions so that the data could be matched with the tax returns of the individual to see if he or she is evading taxes.
Every person has to quote his PAN or General Index Register Number in documents pertaining to the following transactions:
Sale/purchase of any immovable property valued at Rs 5 lakh or more.
Sale/purchase of motor vehicle which requires registration.
A time deposit exceeding Rs 50,000 with a banking company.
A deposit exceeding Rs 50,000 in any account with Post Office Saving Bank.
A contract of a value exceeding Rs 10 lakh for sale or purchase of securities.
Opening an account with a banking company to which the Banking Regulation Act,1949 applies.
Applying for installation of a telephone,including cellular telephone.
Payment to hotels and restaurants against bills for an amount exceeding Rs 25,000 at any one time.