Compliance requirements Rule 114B to 114D, Rule 114DB and Rule 114E

by | May 5, 2020 | Taxation

This write up has been taken up in three parts:-

PART I.

Rule 114B – Transactions in relation to which permanent account number is to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 139A

Rule 114C – Verification of Permanent Account Number in transaction specified in rule 114B

Rule 114D – Time and manner in which persons referred to in rule 114C shall furnish a statement containing particulars of Form No. 60

PART II.

Rule 114DB – Information and documents to be furnished under section 285A

PART III.

Rule 114E – Furnishing of statement of financial transactions

PART I

Rule 114B of the Rules lays down the criteria of transactions and the value of such transactions which require every person to quote his/ her PAN on all the requisite documents pertaining to such transaction. The list of 18 such transactions have been mentioned in the Rules which have been reproduced as under:

  1. Sale or purchase of a motor vehicle or vehicle, as defined in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988) which requires registration by a registering authority under Chapter IV of that Act, other than two wheeled vehicles.
  2. Opening an account [other than a time-deposit referred to at Sl. No.12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).
  3. Making an application to any banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution, for issue of a credit or debit card.
  4. Opening of a demat account with a depository, participant, custodian of securities or any other person registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).
  5. Payment to a hotel or restaurant against a bill or bills at any one time.
  6. Payment in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time
  7. Payment to a Mutual Fund for purchase of its units.
  8. Payment to a company or an institution for acquiring debentures or bonds issued by it.
  9. Payment to the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934) for acquiring bonds issued by it.
  10. Deposit with,—
    1. banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);
    1. Post Office.
  11. Purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).
  12. A time deposit with,—

(i) a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) a Post Office;

(iii) a Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013); or

(iv) a non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public.

  1. Payment for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007), to a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution.
  2. Payment as life insurance premium to an insurer as defined in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938).
  3. A contract for sale or purchase of securities (other than shares) as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).
  4. Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange.
  5. Sale or purchase of any immovable property.
  6. Sale or purchase, by any person, of goods or services of any nature other than those specified at Sl. Nos. 1 to 17 of this Table, if any.

Quoting of PAN on the documents where the transactions are in the nature of above listed items, is mandatory. However, it would not apply to Central Government, the State Government and the Consular Offices; Non-residents for the transactions other than those mentioned at 1,2,3,4,7,8,10,12,14,15,16 and 17. Where, the person does not have a PAN, declaration in Form 60 is required to be made.

Rule 114C of the Rules makes it compulsory for the person receiving the documents in relation to transaction mentioned in Rule 114B, to verify that PAN has been duly mentioned on all the documents or Form 60 has been collected in cases where there is no PAN mentioned on the documents.

Rule 114D prescribes that the details in declaration collected for a particular financial year should be submitted to the Director of Income-tax (Intelligence and Criminal Investigation) or Joint Director of Income-tax (Intelligence and Criminal Investigation) as a part of Annual Information Reporting in Form 61 and that person should retain the Form 60 for a period of 6 years from the end of the Financial Year in which the transaction was undertaken. The due date of filing this Form 61 is 30 April 2018 for the FY 2017-18.

PART II

Section 285A introduced by Finance Act, 2015 w.e.f. 1-4-2016 prescribes to furnish information and documents by an Indian concern where any share of, or interest in, a company or an ‘entity registered or incorporated outside India’ derives, directly or indirectly, its value substantially from the assets located in India, as referred to in Explanation 5 to section 9(1)(i) of Income-tax Act, 1961 (‘the Act’), and such company or as the case may be entity holds directly or indirectly such assets in India through, or in, an Indian concern. The information is required to be furnished in Form 49D electronically under DSC to the AO having jurisdiction over the Indian concern within a period of 90 days from the end of financial year in which any transfer of the share of, or interest in, a company or entity incorporated outside India (as mentioned above) has taken place. Further, if such transfer has the effect of transfer of right in management or control on such Indian concern, then the information shall be furnished in the said form within 90 days of the transaction. The Rule also separately provides a list of documents which are required to be maintained and reproduced when called upon by the Income-tax authority.

PART III

Rule 114E was introduced after the introduction of section 285BA of the Act pertaining to statement of financial transactions, all the financial transactions mentioned in this Rule, if undertaken by the class of persons mentioned therein are required to be reported in Form 61A to the office of Director of Income-tax (Intelligence and Criminal Investigation) or Joint Director of Income-tax (Intelligence and Criminal Investigation). The due date for filing of this form for the FY 2017-18 is 31.05.2018. The list of financial transactions has been given below:

Sr. no. Nature and value of transaction Class of person (reporting person)
1.   (a) Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to ten lakh rupees or more in a financial year. (b) Payments made in cash aggregating to ten lakh rupees or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007). (c) Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to fifty lakh rupees or more in a financial year, in or from one or more current account of a person.   A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
2.   Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person. i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General10 as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).  
3.   One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person. (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); (iii) Nidhi10 referred to in section 406 of the Companies Act, 2013 (18 of 2013); (iv) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (6 of 1934), to hold or accept deposit from public.  
4.   Payments made by any person of an amount aggregating to— (i) one lakh rupees or more in cash; or (ii) ten lakh rupees or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year.   A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or any other company or institution issuing credit card.
5.   Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company). A company or institution issuing bonds or debentures.
6.   Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company. A company issuing shares.
7.   Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year. A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013).
8.   Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund). A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf.
9.   Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to ten lakh rupees or more during a financial year. Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
10.   Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more. Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.
11.   Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.) Any person who is liable for audit under section 44AB of the Act.