HNIs may be told to apply for PAN

NEW DELHI: High networth individuals, who have failed to quote their permanent account numbers, against high-value purchases made in ���04-05, may be the first set of people to be directed by the finance ministry to apply for a PAN number.

The government has, in Budget ���06-07, taken the power to issue PAN suo-moto in some cases. Income Tax (I-T) authorities are also set to arm themselves with the power to direct people to apply for PAN.

The trigger for the move was scrutiny of returns filed by third parties on high-value purchases of their clients which showed that nearly 60% of the transactions were made without quoting PAN. It is quite possible that some HNIs may be evading taxes.

High-value financial transactions are being tracked through the system of annual information returns (AIR). These returns have been filed by third parties, including credit card companies, mutual funds, companies floating IPOs, bonds and debentures, registrars of property and the RBI in ���05-06, listing out financial transactions of their clients in the previous fiscal.

The government has taken the powers as part of the broad plan to make PAN the unique identification number for all tax assessees in the country. The PAN will also play a crucial role in the finance ministry���s plan to digitise all information on tax payments, both direct and indirect, of every assessee in the country.

The National Securities and Depositories, which hosts the tax information network (TIN), has processed the first set of annual information returns (AIR) filed by designated authorities on high-value investments made by individuals in ���04-05.

The NSDL will create PAN-wise individual ledger accounts. The transactions in the ILS will be matched with income tax returns of individuals to check if there has been any short payment or evasion. However, this process cannot be completed in the absence of PAN numbers.

Hence, the first set of individuals who could receive directives from IT authorities are those who have not quoted their PAN numbers. PAN is a ten-digit alpha numeric number which has to be mandatorily quoted by individuals filing their tax returns.