INSURANCE POLICIES NOW IN THE PAN

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The next time you buy an insurance policy or carry out a transaction at the post office, you will be required to provide your Permanent Account Number (PAN). The Budget has not specified the types of transactions though it was mentioned that the requirement of PAN would be extended to all transactions in the financial market subject to suitable threshold limits.

Significantly, on the Rs 60,000-crore relief package for farmers, Mr. R Prasad, chairman of the Central Board of Direct Taxes (CBDT) said in an exclusive interview that the government will pay this amount to the banks, which in turn will return at least Rs 20,000 cr to the government as taxes. Thus, Rs 40,000 cr will effectively go out of the government’s kitty and banks would actually stand to gain through this relief package. It may be pointed out that bank stocks had slid after the announcement.

Speaking on the new provision for quoting PAN on a new set of transactions, Mr. Prasad said that the government would notify the changes under Section 139(A) of the Income-tax Act soon as a result of which, quoting PAN will be made mandatory for all transactions including buying of an insurance policy and relatively larger transactions at the post offices. “This will strengthen our third party information mechanism,” he said. In fact, the tax authority is concerned about the enforcement of the new rules in post offices as there are millions of people who don’t have PAN numbers in villages and small towns. “Bringing in such a system to our post offices across the country will be quite challenging. Also, banks will have to enforce the rules more efficiently. As PAN will be required for opening all accounts in a bank now, every transaction therein will be recorded,” Mr Prasad said.

The CBDT will change rule 114(B) under Section 139 (A) of the Income-Tax Act to accommodate the changes announced in the Finance Bill.

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