PAN, when is it necessary?

QUESTION: When is Permanent Account Number (PAN) necessary?

ANSWER: PAN is necessary in following circumstances: (a) sale or purchase of any immovable property valued at Rs. 5 lakhs or more; (b) sale or purchase of a motor vehicle or vehicle other than a two wheeler; (c) a time deposit, exceeding Rs. 50,000, with a banking company; (d) a deposit, exceeding Rs. 50,000, in any account with Post Office Savings Bank; (e) a contract of a value exceeding Rs. 1 lakh for sale or purchase of securities as defined in clause (h) of Sec. 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (f) opening a bank account; (g) making an application for installation of a telephone connection (including a cellular telephone connection); (h) payment to hotels and restaurants against their bills for an amount exceeding Rs. 25,000 at any one time; (i) payment in cash for purchase of bank drafts or pay orders or bankers cheques from a banking company for an amount aggregating Rs. 50,000 or more during any one day; (j) deposit in cash aggregating Rs. 50,000 or more, with a banking company; and (k) payment in cash in connection with travel to any foreign country of an amount exceeding Rs. 25,000 at any one time, subject to exception for those foreign travel to neighbouring countries or for pilgrimage under Explanation to Sec. 139(1). One may look out for more and more items to be notified in future.

If PAN has not been allotted, GI number is permissible. If there is neither PAN number nor GI number, Form 60 has to be filed with proof of identity in respect of transaction for which PAN number is prescribed.

Q: My wife who is a housewife has only income from investment by way of interest on deposits less than Rs. 50,000. Is it necessary for her to file return or is it required to be included in my hands, though it falls below the taxable limit?

A: The question does not state the source of wife's deposit. If the amount had been transferred by the reader to his wife, the income is liable to be clubbed in his hands. Such clubbing cannot be avoided, even if the income to be clubbed falls below taxable limit. If the amount had been given by the reader's father or mother to reader's wife, such income would be clubbed in the hands of his father or mother, as section 64 provides for clubbing of income from an asset transferred to son's wife.

If, however, the deposits are her Stridhan property or received by way of gift other than from husband, husband's father or mother or from her past employment or other independent sources, it will be taxable only in her hands. Since her income assessable in her hands falls below taxable limit, there will be no liability.

If the deposit represents her savings out of moneys given to her even by husband for household expenses, such savings described as pin money is not treated as amount transferred without consideration, so that the interest will be her own income. Clubbing provisions will have no application in such cases even as held in R. B. N. J. Naidu v CIT (1956) 29 ITR 194 (Nag) and R. Dalmia (Decd.) v CIT (1982) 133 ITR 169 (Del).

There is no liability on her part to file the return, if she has no taxable income of her own exceeding the taxable limit of Rs. 50,000, unless she satisfies any one of the six criteria of comfortable living under proviso to Sec. 139(1) of the Income-tax Act.

S. Rajaratnam