Legal Risks and Compliance Considerations for Cryptocurrency Exchanges in India
PAN intimation and new AIR reporting requirements
1. PAN intimation &
new AIR reporting
(Rule 114B~114E)
D K Bholusaria
dk@bholusaria.com
2. Today’s Goal!
Understanding background
Section 139A(5) and 285BA(1)
Rule 114B~114E
Changes as compared to previous requirements
Penalties for default
Discussion and open house
3. Background
Government is committed to curb the circulation of black
money and widening of tax base
Recommendations of the Special Investigation Team (SIT) on
Black Money.
New rules are expected to be useful in widening the tax net
by non-intrusive methods.
Expected to help in curbing black money and move towards
a cashless economy.
(source: Press Information Bureau)
4. Who is required to have PAN?
(Section 139A(1))
All persons -
if Total Income > Threshold limit
Company and Firms – Mandatory from day 1
Individuals and HUFs – more than 2.5 / 3 / 5 lacs
if in business, turnover > 5 lacs in any
previous year
if required to furnish return u/s 139(4A)
Form ITR7
5. Section 139A(5)
139A. Permanent Account number
…
(5) Every person shall—
…
(c) quote such number in all documents
pertaining to such transactions as may be
prescribed* by the Board in the interests of the revenue, and
entered into by him:
Provided that the Board may prescribe different dates for
different transactions or class of transactions or for different
class of persons
…
* Rule 114B~114D and form 60 and 61
6. Section 285BA(1)
Obligation to furnish statement of financial transaction or
reportable account.
(1) Any person, being—
… long list…
who is responsible for registering, or, maintaining books of account
or other document containing a record of any specified financial
transaction or any reportable account as may be prescribed,
under any law for the time being in force,
shall furnish a statement* in respect of such specified
financial transaction or such reportable account which is
registered or recorded or maintained by him and information
relating to which is relevant and required for the purposes of this
Act, to the income-tax authority or such other authority or agency
as may be prescribed*.
* Rule 114E and form 61A
8. As an overview, the new Rules
primarily provide for the following:
List of PAN reportable and monetary threshold
for such reporting transactions (Rule 114B);
List of specified persons responsible to ensure
PAN is duly quoted or in absence of PAN, a
declaration in Form 60 complete details is
furnished (Rule 114C);
Mode and manner of furnishing by certain
specified persons of half yearly statements
containing particulars of declarations received in
Form 60 (Rule 114D)
9. Sl# Nature of transactions Old New / Changes
1 Motor vehicles
(other than two
wheelers)
All sales/purchases No change
2 Opening an account with
a banking company.
(other than time deposit)
All new accounts.
(Co-op banks not covered
earlier)
No change except:
- Basic Savings Bank Deposit
Account excluded
- Co-operative banks added
3 Credit card Application to banking
company / any other
company / institution for
credit card
No change.
Co-operative banks also to
comply.
4 Opening of demat
account
No such requirement in old
rule
With a DP, custodian of
securities (escrow accounts) or
any other person registered u/s
12(1A) of the SEBI Act
5 Hotel / restaurant bill(s) > Rs.25,000/- at any one
time by any mode of
payment
Limit changed to Rs. 50,000/-.
Mode changed to CASH.
PAN Intimations
10. Sl. Nature of transactions Old New / Changes
6 Foreign travel Cash payment in connection
with foreign travel of an
amount exceeding
Rs.25,000/- at any one time
(including fare, payment to
travel agent, purchase of
forex) excluding Haj Travel
Limit increased to Rs. 50,000/-
All kinds of foreign travel
including Haj
7 Purchase of Mutual fund
units from Mutual funds
≥ 50,000/- for purchase > 50,000/- for purchase
8 Debentures/ bonds
issued by company /
institution
No separate requirement in
old rule
> 50,000/- for purchase
9 Purchase of RBI bonds No separate requirement in
old rule
> 50,000/- for purchase
PAN Intimations
11. Sl# Nature of transactions Old New / Changes
10 Cash deposit with
banking
company
≥ Rs.50,000/- or more
during any one day
(Co-op banks not covered)
> Rs.50,000/- during any one day
Co-op Banks included
11 Cash purchase of
bank drafts/ pay
orders/ banker's
cheques
≥ Rs.50,000/- or more
during any one day
(Co-op banks not covered)
> Rs.50,000/- during any one day
Co-op Banks included
12 Time deposit > Rs.50,000/-
with a banking company
(single deposit) (any mode)
i. Deposits with Co-op banks,
Post Office, Nidhi, NBFC
companies will also need PAN;
ii. Deposits aggregating to more
than Rs.5 lakh during the year
will also need PAN
13 Payment for prepaid
instruments issued
under Payment &
Settlement Act
No separate requirement in
old rule
Rs.50,000/- during any one day
- Co-op Banks included
- Mode of payment: Cash / DD /
Cheque / PO. Net banking /
NEFT / RTGS / IMPS excluded.
PAN Intimations
12. Sl. Nature of transactions Old New / Changes
14 Life insurance
premium
No separate requirement in
old rule
> 50,000/- per financial year
15 Sale or purchase of
securities
Contract for sale / purchase
of a value exceeding Rs.1
lakh per transaction
"Shares" excluded now.
16 Sale or purchase of
Shares of Unlisted
Company
No separate requirement in
old rule
> 1 Lakh per transaction
17 Sale or Purchase of
Immovable property
Valued at Rs.5 lakh or
more
i. Sale/ purchase exceeding
Rs.10 lakh;
i. Properties valued by Stamp
Valuation authority at amount
exceeding Rs.10 lakh will also
need PAN.
18 Purchases or sales of
goods or
services
No separate requirement in
old rule
Purchase/ sale of any goods or
services exceeding Rs.2 lakh
per transaction.
PAN Intimations
13. Certain transactions deleted / merged
Purchase of new shares of a company
Deposit with Post Office Savings Bank
Installation of telephone / cell phone
connections
Purchase of jewellery / bullion
14. Expanded scope of Form 60
Additional Info:
A. number of other joint parties involved in the
transaction
B. mode of payment
C. the PAN application number, if applied for
D. estimated total income of the declarant, if
PAN is not applied for
E. A verification stating that he does not possess
a PAN and that his estimated total income is
below taxable threshold
15. Changes in exempt categories
Old Rule New Rule
a) Non-residents (NR);
b) Central Government, State
Government and Consular
Offices in transactions where
they are the payers.
c) Persons who have agricultural
income and are not in receipt
of any other taxable income
a) NRs will now need to furnish PAN
(or form 60) for certain
reportable transactions
b) Government (Central as well as
State) and Consular offices
continue to be exempted from
all PAN reportable transactions
whether they are payers or
otherwise.
c) Persons earning agricultural
income (without any other
taxable income) are now
required to file a declaration in
new Form 60 itself (instead of
old Form 61).
16. Duty of person accepting declaration /
PAN info
Obliged to verify compliance of PAN reporting
Obliged to verify that PAN provided is correct
Obtain form 60 is PAN not furnished.
Shall not accept form 60 where the amount of
income (other than agricultural income)
mentioned in column of estimated total
income in Form 60 exceeds the taxable
threshold unless PAN is applied for by the
declarant.
17. E-filing of form 60 (as form 61)
Old Rule required every person receiving Form 60 to
forward hard copy thereof to the jurisdictional Tax
Authority on 6 monthly basis.
Instead, now 6 monthly e-filing of particulars thereof
along with details of relevant PAN reportable
transactions in new Form 61 made mandatory.
Hard copy of form 60 to be maintained for 6 years
starting from date of receiving.
E-filing of new Form 61 does not apply to persons:
issuing bills in relation to transactions of hotel payments,
foreign travel and sale of any other goods/ services if such
persons are not under obligation to get their accounts
audited under section 44B.
18. E-filing of form 60
To be submitted with:
Joint Director / Director of Income-
tax (Intelligence and Criminal
Investigation)
Due dates:
1. Half year ending September 30:
October 31st
2. Half year ending March 31: April
30th
20. AIR reporting
PAN reporting compliance on individual transactions
is complemented by AIR obligation for persons who
are obligated to verify PAN reporting compliance.
AIR involves furnishing of information to Tax Authority
on annual basis.
Apart from PAN reportable transaction, scope of AIR
obligation also extends to certain additional
financial transactions like cash withdrawals from
bank accounts, credit card transactions etc.
The new Rules have modified scope of AIR and
monetary thresholds for transactions subject to AIR
21. AIR Significant changes - Additions
Nature of Financial Transactions Specified class of persons
(reporting persons)
Purchase of bank instruments:
i. Purchase of bank drafts/ pay orders/ banker’s cheque
in cash aggregating ≥ Rs.10 lakhs in a financial year
ii. Purchase of pre-paid instruments issued by RBI under
Payment and Settlement Systems Act in cash
aggregating ≥ Rs.10 lakhs during the financial year
Cash deposit/ withdrawal* in Current account:
i. Cash deposits OR cash withdrawals (including through
bearer’s cheque) aggregating ≥ Rs. 50 lakh in a
financial year, in or from one or more current account of
a person.
I. A banking company; or
II. A co-operative bank
Cash deposits in other accounts:
Cash deposits aggregating ≥ Rs. 10 lakhs in a financial
year, in one or more accounts (other than current account
and time deposits) of a person
I. A banking company; or
II. A co-operative bank
III. Post Master General as
per Indian Post Office Act
* Cash deposits and cash withdrawals limits to be computed independently
22. AIR Significant changes - Additions
Nature of Financial Transactions Specified class of persons
(reporting persons)
Time Deposits:
One or more time deposits aggregating ≥ Rs. 10 lakhs in a
financial year (other than a time deposit made through
renewal of another time deposit)
I. A banking company;
II. A co-operative ban
III. Post Master General as per Indian Post
Office Act
IV. Nidhi company
V. NBFC registered with RBI to hold public
deposits
Buy back of shares:
Buy back of shares from any person for amount or value
aggregating ≥ Rs. 10 lakhs in a financial year (other than
the shares bought in the open market)
A listed company undertaking buy back
of its shares as per Indian Companies Act
Sale of foreign currency by Authorised Person:
Receipt of funds from any person for sale of foreign
currency by Authorised Person 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 ≥ Rs. 10 lakhs during a financial year.
Authorised person under Foreign Exchange
Management Act
23. AIR Significant changes - Additions
Nature of Financial Transactions Specified class of persons
(reporting persons)
Cash sale of goods/ services:
Receipt of cash payment > Rs.
2 lakhs for sale of goods or
services (not specifically covered
under any other categories of new
Rule)
Person (seller) liable to get
his accounts audited* for tax
purposes under Income Tax
Laws
* Audit based on gross turnover/ receipt threshold
24. AIR - changes in monetary limits
Nature of Financial
transaction
Earlier limit New limit
Credit card payments Payments aggregating to
≥ Rs. 2 lakhs in a financial
year
Payments (in respect of one or more cards)
aggregating to:
1. ≥ Rs. 1 lakh in cash
2. ≥ Rs. 10 lakhs by any other mode in a
financial year
Receipt from any person for
acquisition of bonds/ debentures
issued by company/ institution
(primary subscription)
≥ Rs. 5 lakhs Amount aggregating to ≥ Rs. 10 lakhs in a
financial year [Other than the amount
received on renewal of bond/ debenture]
Receipt from any person for
acquiring shares issued by a
company (primary subscription)
≥ Rs. 1 lakh
(public or rights issue)
(share application excluded)
(private placement excluded)
Amount aggregating to ≥ Rs. 10 lakhs in a
financial year
- share application money included
- Private placement included now
Receipt from any person for
acquiring units of a Mutual Fund
≥ Rs. 2 lakhs Amount aggregating to ≥ Rs. 10 lakhs in a
financial year [Other than amount received
on account of transfer of funds from one
scheme to another scheme of that Mutual
Fund]
Purchase or sale of immovable
property
≥ Rs. 30 lakhs as per
agreement
≥ Rs. 30 lakhs as per agreement or as
valued by stamp duty authority
25. AIR reporting – other changes
The new Rule provides clarifications on aggregation for
computing the monetary thresholds for AIR (e.g. in case of joint
holding in any account or transaction, same information shall
be furnished for all joint holders)
AIR return to be furnished exclusively online under DSC. Only
exception is for Post Master General and Registrar/Inspector
General, who may furnish return in floppy/CD/DVD
The time limit for furnishing AIR has been preponed to 31 May
(instead of 31 August) immediately following the relevant
financial year.
27. Penalties and prosecution
Any person making a false statement in the declaration (Form
60) shall be liable for prosecution under Income Tax Act and if
found guilty shall be punishable with rigorous imprisonment
(from 3 months to 7 years) and fine.
Section 271FA: Failure to file AIR return
Non compliance to sec 285BA(1) – Rs. 100 per day
Non compliance to sec 285BA(5) – Rs. 500 per day
Section 272B: Non compliance of section 139A / 139A(5) – Rs.
10,000