Friday, June 22, 2012

PAN not needed for people outside IT Bracket

People with income below taxable limit need not furnish Permanent Account Number(PAN), the Karnataka high court ruled. 

The High Court order came as a relief to thousands of individuals who are asked to provide PAN despite having income below the taxable limit. Section 206 AA of the Income-Tax Act, which became effective from assessment year 2010-11, makes it mandatory for every person to furnish PAN in their transactions with banks and financial institutions.

They do not have any income other than the income received from FIs and they have declared this under Form 15G. Form 15G is usually used for declaring that a person's income is below taxable limit, and therefore, the bank or FI is not required to deduct tax at source while making payments.

Under section 139A of the I-T Act, only persons whose income is chargeable to tax are required to obtain a PAN. But section 206AA compels even those without a taxable income to obtain a PAN, failing which tax will be deducted at source. The High Court observed that lack of PAN discourages the poor and the illiterate to make small investments. The HC further observed that persons whose income is below the taxable limit need not have a PAN and also they need not furnish income tax declaration/returns. The poor and illiterate would find it difficult to approach the I-T authorities, or other government authorities to get PAN, the high court observed.

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