Permanent Account Number (PAN)[Section 139A and Rule 114]

Permanent Account Number (PAN)[Section 139A and Rule 114]

Permanent Account Number (PAN) is a unique ten-digit alphanumeric code issued by the Income Tax Department of India. It serves as a universal identification number for individuals, companies, and entities engaging in financial transactions.

Table of Contents

1. Who has to apply for PAN? [Section 139A (1)]:

According to Section 139A(1) of the Income Tax Act, 1961, the following individuals are required to apply for a Permanent Account Number (PAN):

Individuals

All individuals, including citizens of India as well as foreign nationals residing in the country, are required to apply for PAN if they fall under any of the following categories:

  • Having taxable income in India : This means that if your total income, or the total income of any person for whom you are responsible, exceeds the basic exemption limit, you must apply for a PAN. The basic exemption limit for the financial year 2023-24 is ₹5 lakh for individuals under 60 years old, ₹3 lakh for individuals between 60 and 80 years old, and ₹2.5 lakh for individuals over 80 years old.
  • Engaging in any business or profession that requires them to file an income tax return
  • Applying for a credit card with a limit exceeding a specified amount
  • Opening a bank account, except for Basic Savings Bank Deposit Accounts (BSBDA)
  • Investing in securities, mutual funds, or debentures
  • Buying or selling immovable property valued above a certain threshold
  • Applying for a loan exceeding a specified amount
  • Applying for a passport
  • Receiving a pension or any other income subject to tax deduction at source (TDS)

Companies and Entities

Companies and entities, whether registered in India or abroad, must obtain a PAN if they are involved in any financial transactions within India. This includes:

  • Companies incorporated under the Companies Act, 2013
  • Partnership firms
  • Trusts
  • Associations of persons (AOPs)
  • Body of individuals (BOIs)
  • Artificial juridical persons
  • Local authorities
  • Statutory bodies
  • Hindu Undivided Families (HUFs)

Specified Financial Transactions

There are a number of specified financial transactions in which quoting of PAN is mandatory. These include:

  • Sale or purchase of a motor vehicle or vehicle other than two-wheeled vehicles
  • Sale or purchase of immovable property
  • Opening an account with a bank or financial institution
  • Opening a demat account with a stockbroker
  • Making a payment of ₹2.5 lakh or more in a single transaction for goods or services
  • Making a payment of ₹1 lakh or more in a single transaction for travel expenses
  • Making a payment of ₹50,000 or more in a single transaction for hotel bills
  • Making a payment of ₹10,000 or more in a single transaction for jewelry
  • Making a payment of ₹5,000 or more in a single transaction for cash withdrawals from a bank account

Exceptions

There are a few exceptions to the requirement of obtaining a PAN. The following individuals or entities are not obligated to apply for PAN:

  • Non-resident individuals or entities who do not engage in any financial transactions in India
  • Individuals whose income is exempt from tax under the Income Tax Act
  • Central and state government departments, except when they engage in financial transactions subject to TDS
  • Consular offices of foreign countries
  • Specified institutions, such as the Reserve Bank of India, Securities and Exchange Board of India, etc.

2. Power Delegated to the Central Government to Notify Classes of Persons for PAN Application [Section 139A(1A)].

In order to streamline the process of Permanent Account Number (PAN) application, the Central Government has been given the authority to delegate power to notify specific classes of individuals or groups for whom it will be mandatory to apply for a PAN. This provision is outlined in Section 139A(1A) of the Income Tax Act.

With a view to progressively making PAN a common business identification number for other departments such as the Central Board of Excise and Customs and the Director General of Foreign Trade, the Act has delegated the power to the Central Government to notify class or classes of persons for whom it will be obligatory to apply for PAN, provided tax is payable by them under the Income- tax Act or any tax or duty is payable by them under any other law in force including importers and exporters whether any tax is payable by them or not.

The Central Government by Notification No. 11468, dated 29.8.2000 has notified the following class or classes of persons who shall apply to the Assessing Officer for allotment of permanent account number:—

(i)         Exporters and Importers as defined in section 2(20) and section 2(26) of the Customs Act, 1962, who are required to obtain an importer-exporter code under section 7 of the Foreign Trade (Development and Regulations) Act, 1992.

(ii)        Assessees as defined in rule 2(3) of Central Excise Rules, 1944. (it is now merged under GST Law)

(iii)       Persons who issue invoices of Cenvat i.e. traders, etc. requiring registration under Central Excise Rules, 1944. (it is now merged under GST Law)

(iv)       Persons who are assessees under service tax. (it is now merged under GST Law)

The above persons shall apply for allotment of PAN within 15 days of the date of publication of the notification in the Official Gazette. However, persons who may fall in the above category, after the date of the above notification, shall apply for allotment of PAN:—

(a)        in case of (I) above, before making an import or export;

(b)        in case of (ii) and (iii) above, before making an application for registration under central excise;

(c)        in case of (iv) above, before making an application for registration under service tax.

The Central Government, by Notification No. 355/2001, dated 11.12.2001 has further notified the following class or classes of persons:

  1. Persons registered under the Central Sales Tax Act, 1956 or the general sales tax law of the appropriate State or Union Territory, as the case may be.
  2. As on the date of this notification, a person falling within a class or classes of persons referred to in paragraph I, shall apply for the allotment of permanent account number within thirty days of the date of publication of this notification in the Official Gazette.
  3. A person who may fall within such class or classes of persons after the date of this notification, as is referred to in paragraph (1), shall apply for the allotment of permanent account number (PAN) before making any application for registration under the Central Sales Tax Act, 1956 or the general sales tax law of the appropriate State or Union territory, as the case may be.

3. Prescribing New Class of Persons for Allotment of PAN and Suo-Moto Allotment of PAN [Section 139A(1B)]:

The introduction of Section 139A(1B) stems from the government’s commitment to improve tax administration and enhance the ease of doing business in India. By prescribing a new class of persons for PAN allotment, the Income Tax Department aims to bring more individuals and entities under the tax net, thereby reducing tax evasion and promoting transparency.

Examples of Persons Who May Be Prescribed Under Section 139A(1B)

Some examples of persons who may be prescribed under Section 139A(1B) include:

  • Individuals who are not currently required to file an income tax return, but who earn income from sources other than salaries, such as rental income or interest income.
  • Individuals who are not currently required to file an income tax return, but who are likely to exceed the basic exemption limit in future years.
  • Individuals who are not currently required to file an income tax return, but who are required to furnish their PAN for other purposes, such as opening a bank account or applying for a passport.
  • Persons who are required to file income tax returns under Section 139(1), even if their total income is below the taxable limit.
  • Persons who are required to deduct or collect tax at source under any provision of the Act.
  • Persons who are required to furnish information under any provision of the Act.
  • Persons who are required to maintain accounts under any provision of the Act.
  • Persons who are required to make payments under any provision of the Act.
  • High-value taxpayers: Individuals who have filed an income tax return in any of the preceding four years and have paid tax of ₹5 lakh or more in any of those years are required to apply for a PAN.
  • Taxpayers with foreign income or assets: Individuals who have foreign income or assets exceeding ₹25 lakh are required to apply for a PAN.
  • Individuals who are required to file specified reports: Individuals who are required to file specified reports under the Income Tax Act, such as the Foreign Account Tax Compliance Act (FATCA) report, are required to apply for a PAN.

Suo-Moto Allotment of PAN

In addition to prescribing a new class of persons, Section 139A(1B) also empowers the Income Tax Department to suo-moto allot PAN to certain individuals. Suo-moto allotment refers to the proactive issuance of PAN by the department without the individual applying for it. This provision is primarily aimed at individuals who have not yet obtained a PAN but are likely to be involved in financial transactions that require PAN compliance. The department will utilize its data sources, including information from various government agencies and financial institutions, to identify individuals who meet the criteria for suo-moto allotment of PAN. By taking this proactive approach, the government aims to ensure that all eligible individuals are brought into the tax net and that financial transactions are accurately recorded.

4.  PAN may be allotted by the Assessing Officer (AO) [Section 139A(2)]:

The Assessing Officer plays a crucial role in the PAN allotment process. The AO is an officer designated by the Income Tax Department who is responsible for assessing the income and tax liabilities of taxpayers. They have the authority to allot PANs to individuals and entities.

When an application for PAN is received, the AO verifies the details provided by the applicant and ensures compliance with the necessary rules and regulations. The AO also verifies the supporting documents submitted along with the application to establish the identity and address of the applicant.

Based on the verification process, the AO decides whether to allot a PAN to the applicant. If the application is found to be in order and all requirements are met, the AO proceeds with the PAN allotment.

PAN Allotment Process

The PAN allotment process by the Assessing Officer involves the following steps:

Verification of Application: The AO carefully examines the PAN application form and supporting documents submitted by the applicant. This includes proof of identity, address, and date of birth.

Validation of Information: The AO cross-checks the information provided in the application with the supporting documents to ensure accuracy and authenticity.

Compliance Check: The AO verifies if the applicant has complied with all the necessary requirements and has not violated any tax laws or regulations.

PAN Allotment: If the application and supporting documents are found to be satisfactory, the AO proceeds with the PAN allotment. A unique PAN is generated and communicated to the applicant.

Intimation: The AO sends an intimation letter or email to the applicant, informing them about the allotted PAN. The letter also contains important details such as the applicant’s name, PAN number, and date of allotment.

Timeframe for PAN Allotment

The time taken for PAN allotment by the Assessing Officer may vary depending on various factors such as the volume of applications received, completeness of application and supporting documents, and the workload of the AO.

See also  Form Number and Documents Required for PAN Application as per Rule 114 of Income Tax Rules, 1962

Under normal circumstances, the PAN is allotted within 15 to 20 working days from the date of receipt of the application. However, it is important to note that this timeframe is indicative and may be subject to change.

5.  Applying for a PAN under Section 139A (3) :

Under the Income Tax Act, 1961, individuals who do not fall under Section 139A(1) or (2) have the option to apply for a Permanent Account Number (PAN) under Section 139A(3). This provision allows any person who is not eligible for a PAN through the regular channels to obtain a PAN for their tax-related transactions.

Section 139A(3) of the Income Tax Act, 1961, enables individuals who are not covered by Section 139A(1) or (2) to apply for a PAN. While Section 139A(1) pertains to individuals who are required to file an income tax return, and Section 139A(2) applies to certain categories of entities such as companies, firms, and trusts, Section 139A(3) provides an avenue for those who do not fall into these categories.

This means that even if you are not required to apply for a PAN under Section 139A(1) or (2), you can still apply for one if you want to. There are a number of reasons why you might want to do this, such as:

  • To make it easier to do business in India
  • To open a bank account or other financial institution account
  • To invest in mutual funds or other securities
  • To make large financial transactions
  • To travel abroad

To apply for a PAN under Section 139A(3), you will need to submit a Form 49AA to the NSDL. The form is available online and can be submitted electronically or in person.

Once you have submitted your application, the NSDL will process it and issue you a PAN card. You will need to keep your PAN card safe and secure, as it is an important financial document.

It is important to note that even if you are not required to apply for a PAN under Section 139A(1) or (2), you may still be required to quote your PAN on certain documents. For example, you may be required to quote your PAN when you:

  • File an income tax return
  • Open a bank account or other financial institution account
  • Invest in mutual funds or other securities
  • Make large financial transactions
  • Travel abroad

Failure to quote your PAN when required to do so can result in a penalty of ₹10,000.

Therefore, it is important to be aware of the provisions of Section 139A(3) and to comply with them.

Eligibility for PAN under Section 139A(3)

To be eligible for a PAN under Section 139A(3), an individual must meet certain criteria:

  • Not falling under the purview of Section 139A(1) or (2)
  • Requiring a PAN for specific financial transactions
  • Being able to provide the necessary supporting documents

Applying for a PAN under Section 139A(3)

The process of applying for a PAN under Section 139A(3) is similar to the regular PAN application process. Here are the steps to follow:

  • Obtain Form 49A from the official website of the Income Tax Department or any authorized PAN Service Center.
  • Fill in the form with accurate details, including personal information, contact details, and the reason for applying under Section 139A(3).
  • Attach the necessary supporting documents as specified in the form, such as proof of identity, address, and date of birth.
  • Submit the completed form and supporting documents to the nearest PAN Service Center or send them by post to the designated address.
  • Pay the required fee, which is currently ₹110 (excluding Goods and Services Tax), either online or through a demand draft.
  • After verification of the application and documents, the Income Tax Department will issue a PAN to the applicant.

6.  PAN to be Quoted in Certain Cases [Section 139A (5)]

In India, the Permanent Account Number (PAN) is a unique ten-digit alphanumeric identifier issued by the Income Tax Department. It is essential for various financial transactions and acts as a vital tool for the government to track and monitor taxable transactions. The PAN is required to be quoted in specific cases as per Section 139A (5) of the Income Tax Act, 1961.

Quoting PAN in Specified Transactions

Section 139A (5) of the Income Tax Act mandates the quoting of PAN in certain transactions to ensure transparency and accountability. Let’s take a look at the scenarios where PAN is required to be quoted:

(i)   Sale or purchase of a motor vehicle or vehicle other than two-wheeled vehicles:

This includes the sale or purchase of any motor vehicle, whether new or used, that requires registration by a registering authority under Chapter IV of the Motor Vehicles Act, 1988.

(ii)  Opening an account (other than a time-deposit) with a banking company or a co-operative bank:

This includes opening any kind of bank account, except time deposits, with a banking company or a co-operative bank.

(iii)  Making a payment of ₹2.5 lakh or more in a single transaction for goods or services:

This includes any payment made in excess of ₹2.5 lakh in a single transaction for goods or services, regardless of whether the payment is made in cash or by cheque, demand draft, or other mode of payment.

(iv)  Making a payment of ₹1 lakh or more in a single transaction for travel expenses:

This includes any payment made in excess of ₹1 lakh in a single transaction for travel expenses, such as airfare, hotel bills, and travel insurance.

(v)  Making a payment of ₹50,000 or more in a single transaction for hotel bills:

This includes any payment made in excess of ₹50,000 in a single transaction for hotel bills, including room rent, food, and other incidental charges.

(vi)  Making a payment of ₹10,000 or more in a single transaction for jewellery:

This includes any payment made in excess of ₹10,000 in a single transaction for jewellery, whether precious stones or other precious metals.

(vii) Making a payment of ₹5,000 or more in a single transaction for cash withdrawals from a bank account:

This includes any cash withdrawal made in excess of ₹5,000 in a single transaction from a bank account, whether through an ATM, a bank counter, or other mode of withdrawal.

(viii) Quote PAN while filing an income tax return:

Every taxpayer who is liable to file an income tax return is required to quote their PAN in the return.

(ix)  Quote PAN while submitting documents to the Income Tax Department:

Every person who is required to submit documents to the Income Tax Department, such as Form 16, Form 15G/15H, or Form 13A, is required to quote their PAN on the documents.

(x)  Quote PAN while making investments:

Every person who is making investments in certain specified securities or financial products, such as mutual funds, securities, insurance policies, and bonds, is required to quote their PAN.

Failure to quote PAN in these specified transactions can result in a penalty of ₹10,000 under Section 272B of the Income Tax Act. Therefore, it is crucial for individuals and businesses to be aware of the PAN quoting requirements and comply with them to avoid penalties.

Importance of quoting PAN

The requirement to quote PAN in specified transactions serves several purposes:

  • Prevention of tax evasion: By mandating the use of PAN, the government can track high-value transactions and identify individuals who may be evading taxes. This helps in ensuring that everyone contributes their fair share towards the nation’s development.
  • Enhanced financial transparency: Quoting PAN in financial transactions promotes transparency and accountability. It enables the government to monitor and regulate economic activities, reducing the scope for illegal activities such as money laundering and black money generation.
  • Verification of identity: PAN acts as a reliable proof of identity, helping financial institutions and regulatory authorities verify the authenticity of individuals involved in financial transactions. It aids in preventing fraud and identity theft.
  • Streamlining tax administration: The use of PAN simplifies tax administration by providing a unique identification number for each taxpayer. It facilitates the efficient processing of tax returns, refunds, and other tax-related matters.

Consequences of non-compliance

Failure to quote PAN in the specified transactions can lead to various consequences:

  • Rejection of applications: Banks and financial institutions may reject applications for bank accounts, credit cards, or loans if PAN details are not provided.
  • Imposition of penalties: The Income Tax Department has the authority to impose penalties for non-compliance with PAN requirements. These penalties can range from monetary fines to legal repercussions.
  • Difficulty in financial transactions: Non-compliance with PAN requirements may result in difficulties in conducting certain financial transactions, such as buying or selling securities or property.
  • Increased scrutiny: Individuals who fail to quote PAN in specified transactions may attract increased scrutiny from tax authorities, leading to audits and investigations.

7.  Transactions where Quoting of PAN made Compulsory as prescribed by the Board [Section 139A (5)(c) and Rule 114B]:

Every person shall quote his permanent account number in all documents pertaining to the transactions specified in the Table below, namely;

TABLE

SI. No. Nature of transaction Value of transaction
(1) (2) (3)
1. Sale or purchase of a motor vehicle or vehicle, as defined in section 2(28) of the Motor Vehicles Act, 1988 which requires registration by a registering authority under Chapter IV of that Act, other than two wheeled vehicles. All such transactions.
2. Opening an account (other than a time-deposit referred to at SI. No.12 and a Basic Savings Bank Deposit Account] with a banking company or a cooperative bank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act). All such transactions.
3. Making an application to any banking company or a co-operative bank to which the Banking Regulation Act, 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. All such transactions.
4. Opening of a demat account with a depository, participant, custodian of securities or any other person registered under section 12(IA) of the Securities and Exchange Board of India Act, 1992. All such transactions.
5. Payment to a hotel or restaurant against a bill or bills at any one time. Payment in cash of an amount exceeding
Rs. 50,000
6. Payment in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time. Payment in cash of an amount exceeding
Rs. 50,000.
7. Payment to a Mutual Fund for purchase of its units. Amount exceeding Rs. 50,000.
8. Payment to a company or an institution for acquiring debentures or bonds issued by it. Amount exceeding Rs. 50,000.
9. Payment to the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 for acquiring bonds issued by
it.
Amount exceeding Rs. 50,000.
10. Deposit with.—
(i) a banking company or a co-operative bank to which the Ranking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act);
(ii) Post Office.
Cash deposits,—
(i) exceeding Rs. 50,000 during any one day; or(ii) aggregating to more than Rs. 2,50,000 during the period 09th November, 2016 to 30th December. 2016.
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, applies (including any bank or banking institution referred to in section 51 of that Act). Payment in cash for an amount exceeding Rs. 50,000 during any one day.
12. A time deposit with,—

(i)         a banking company or a co-operative bank to which the Ranking Regulation Act. 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; or

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

Amount exceeding Rs. 50,000 or aggregating to more than Rs. Rs. 5,00,000 during a financial year.
13. 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, to a banking company or a co-operative hank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution. Payment in cash or by way of a bank draft or pay order or banker’s cheque of an amount aggregating to more than Rs. 50,000 in a financial year.
14. Payment as life insurance premium to an insurer as defined in section 2(9) of the Insurance Act, 1938. Amount aggregating to more than Rs. 50,000 in a financial year.
15. A contract for sale or purchase of securities (other than shares) as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956. Amount exceeding Rs. 1,00,000 per transaction.
16. Sale or purchase, by any person, of shares of a company not listed in a recognized stock exchange. Amount exceeding Rs. 1,00,000 per transaction.
17. Sale or purchase of any immovable property. Amount exceeding Rs. 10,00,000 or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
18. Sale or purchase, by any person, of goods or services of any nature other than those specified at Si. No. 1 to 17 of this Table, if any. Amount exceeding Rs. 2,00,000 per transaction:

 

1.         Where a person, entering into any transaction referred to in this rule, is a minor and who does not have any income chargeable to income-tax, he shall quote the permeant account number of his father or mother or guardian, as the case may be, in the document pertaining to the said transaction.

2.         Any person who does not have a permanent account number and who enters into any transaction specified in this rule, he shall make a declaration in Form No.60 giving therein the particulars of such transaction either in paper form or electronically under the electronic verification code in accordance with the procedures. data structures, and standards sped tied by the Principal Director General of Income Tax (Systems) or Director General of Income Tax (Systems).

3.         The provisions of this rule shall not apply to the following class or classes of persons, namely—

(i)         the Central Government. the State Governments and the Consular Offices

(ii)        the non-residents referred to in clause (30) of section 2 of the Act in respect of the transactions other than a transaction referred to at Sl. No. 1 or 2 or 4 or 7 or 8 or 10 or 12 or 14 or 15 or 16 or 17 of the Table.

4.         A person who has an account (other than a time deposit referred to at S.No. 12 of the Table and a Basic Saving Bank Deposit Account) maintained with a banking company or a cooperative bank to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) and has not quoted his permanent account number or furnished Form No. 60, as the case may be, at the time of opening of such account or subsequently, he shall furnish his permanent account number or Form No. 60, as the case may be, to the person specified in clause (c) of sub-rule (1) of rule 114C on or before the 28th day of February. 2017.

Explanation. —For the purposes of this rule, —

(1)        “payment in connection with travel” includes payment towards fare, or to a travel agent or a tour operator, or to an authorized person as defined in clause (c) of section 2 of the Foreign Exchange Management Act, 1999;

(2)        “travel agent or tour operator” includes a person who makes arrangements for air, surface or maritime travel or provides services relating to accommodation, tours, entertainment, passport, visa, foreign exchange, travel related insurance or other travel related services either severally or in package;

(3)        “time deposit” means any deposit which is repayable on the expiry of a fixed period.

8.  Duty of the Person Receiving any Document Relating to Transactions where Quoting of PAN is Compulsory [Section 139A (6)]

Under Section 139A (6) of the Income Tax Act, 1961, it is the duty of the person receiving any document relating to transactions where quoting of PAN is compulsory to ensure compliance with the PAN requirements. This provision places a responsibility on the receiver of such documents to verify and record the PAN details of the transacting parties.

The primary objective of this provision is to promote transparency and accountability in financial transactions and to discourage the use of anonymous or fictitious identities. By mandating the quoting of PAN, the government aims to create a robust system that can track and monitor financial activities effectively.

The person receiving the document may also be required to report to the Income Tax Department if the PAN is not quoted or if the PAN quoted is not valid. The penalty for failure to comply with the provisions of Section 139A(6) is ₹10,000 per transaction.

Here are some specific examples of when Section 139A(6) applies:

  • When a seller delivers a motor vehicle or vehicle other than two-wheeled vehicles to a buyer: The seller must ensure that the buyer’s PAN has been quoted on the sale agreement.
  • When a bank opens an account for a customer: The bank must ensure that the customer’s PAN has been quoted on the account opening form.
  • When a company issues a share certificate to a shareholder: The company must ensure that the shareholder’s PAN has been quoted on the share certificate.
  • When a mutual fund company issues a unit certificate to a unit holder: The mutual fund company must ensure that the unit holder’s PAN has been quoted on the unit certificate.

When a person receives a document that requires the quoting of PAN, they must take certain steps to fulfil their duty:

  • Verify the PAN: The receiver of the document should verify the PAN details provided by the transacting parties. This can be done by cross-checking the PAN number with the Income Tax Department’s database or using the online PAN verification facility available on the official website. It is essential to ensure that the PAN provided is valid and belongs to the respective individual or entity.
  • Record the PAN: Once the PAN has been verified, the receiver must record the PAN details of the transacting parties in the relevant documents or records. This helps in maintaining a proper trail of PAN usage and facilitates future reference or verification, if required.
  • Report Non-Compliance: If the transacting parties fail to provide a valid PAN or provide incorrect PAN details, the receiver must report such non-compliance to the Income Tax Department. This can be done through the prescribed channels, ensuring that the authorities are aware of any attempts to evade PAN requirements.
  • Maintain Confidentiality: It is crucial for the receiver of PAN-related documents to maintain the confidentiality of the PAN details. PAN is a sensitive piece of information and should not be shared or disclosed to unauthorized individuals. The receiver must adhere to data protection and privacy regulations while handling PAN-related information.
  • Stay Updated: The receiver should stay updated with any changes or updates in the PAN requirements. The Income Tax Department periodically issues notifications or circulars regarding PAN-related matters. It is the duty of the receiver to stay informed and ensure compliance with the latest regulations.

Here are some examples of how Section 139A(6) might apply:

  • A person buys a motor vehicle for ₹2.5 lakh in cash. The seller of the vehicle must ensure that the buyer’s PAN is quoted on the sale invoice.
  • A person opens a bank account with a bank. The bank must ensure that the person’s PAN is quoted on the account opening form.
  • A person makes a payment of ₹1 lakh or more in a single transaction for travel expenses. The travel agent must ensure that the payer’s PAN is quoted on the invoice.

9.  Intimation of PAN in certain cases and obligation of the person to whom the PAN is intimated.

Intimating PAN in the specified cases and fulfilling the obligations associated with it helps in ensuring transparency and compliance with tax regulations. It is important for individuals and entities to understand the significance of PAN and adhere to the necessary requirements.

(I)   Obligation of a person receiving any sum / income / amount from which tax has been deducted at source [Section 139A(5A)]

Section 139A(5A) of the Income Tax Act, 1961, mandates that every person receiving any sum, income, or amount from which tax has been deducted at source under Chapter XVIIB is required to intimate their permanent account number (PAN) to the person responsible for deducting such tax. This obligation applies even if the recipient’s total income is not chargeable to income tax.

The obligation to intimate PAN arises as soon as the payment is made, irrespective of whether the payment is made in cash or by cheque, demand draft, or other mode of payment. The recipient must provide their PAN to the deductor either in writing or electronically.

In case the recipient does not have a PAN, they must intimate their General Index Register (GIR) number to the deductor till such time their PAN is allotted. If the recipient fails to intimate their PAN or GIR number, the deductor is required to deduct tax at the higher rate prescribed under the relevant section of Chapter XVIIB.

The penalty for non-intimation of PAN or GIR number is ₹10,000 per transaction. This penalty is applicable to both the recipient and the deductor.

The purpose of Section 139A(5A) is to ensure that the tax deducted at source reaches the government’s coffers accurately and efficiently. By mandating that PAN or GIR numbers be provided, the Income Tax Department can identify and track taxpayers who may be evading taxes.

Here are some examples of how Section 139A(5A) might apply:

  • You receive a salary of ₹5 lakh from your employer. Your employer is responsible for deducting TDS on your salary. You must provide your PAN to your employer so that they can deduct TDS correctly.
  • You receive interest of ₹10,000 from a bank. The bank is responsible for deducting TDS on the interest. You must provide your PAN to the bank so that they can deduct TDS correctly.
  • You receive rent of ₹20,000 from a tenant. You are responsible for deducting TDS on the rent. You must provide your PAN to your tenant so that they can provide you with the correct TDS certificate.

By providing your PAN to the person responsible for deducting TDS, you can help to ensure that the tax system is fair and efficient. You can also help to protect yourself from potential penalties.

Obligations under Section 139A(5A)

Section 139A(5A) of the Income Tax Act states that any person who receives any sum, income, or amount on which TDS has been deducted must comply with certain obligations. These obligations are as follows:

  • Furnishing of information: The recipient of the payment must furnish the necessary details to the income tax authorities. This includes providing their permanent account number (PAN) to the person responsible for deducting the tax.
  • Verification of TDS details: It is the recipient’s responsibility to verify the TDS details mentioned in their Form 26AS, which is a statement showing the tax credits associated with their PAN. Any discrepancies should be promptly reported to the income tax authorities.
  • Filing of income tax return: Even if the recipient’s total income falls below the taxable threshold, they are still required to file an income tax return. This ensures that the TDS amount is appropriately credited to their account and reconciled with their overall tax liability.
  • Claiming TDS: The recipient can claim the TDS amount deducted by the payer as a credit while computing their final tax liability. This can be done by providing the necessary details in their income tax return.
  • Penalties for non-compliance: Failure to comply with the obligations under Section 139A(5A) may result in penalties or other legal consequences. It is important for recipients to fulfill these obligations to avoid any unnecessary complications.

(II)  Obligation of a Person Who Has Deducted Tax at Source (TDS) [Section 139A(5B)]:

A person who is responsible for deducting tax at source is known as a “deductor.” This can include individuals, businesses, or any other entity that is required to deduct tax from payments made to others. Some common examples of deductors include employers deducting tax from employee salaries, banks deducting tax on interest earned, and businesses deducting tax on payments made to contractors or professionals.

Section 139A(5B) of the Income Tax Act, 1961, mandates that a person who has deducted tax at source (TDS) is obliged to take certain actions. These actions include:

Furnishing a TDS certificate to the deductee:

The person deducting TDS is required to furnish a TDS certificate to the deductee within 15 days from the end of the month in which the tax is deducted. The TDS certificate should be in the prescribed format and should contain all the relevant details of the deduction, such as the name of the deductee, the amount of tax deducted, and the PAN of the deductee and the deductor.

Remitting the deducted tax to the Income Tax Department:

The person deducting TDS is required to remit the deducted tax to the Income Tax Department within 7 days from the end of the month in which the tax is deducted. The tax should be remitted through the electronic challan cum statement (ECS) system or by any other mode as specified by the Income Tax Department.

Maintaining records of TDS deductions:

The person deducting TDS is required to maintain records of all TDS deductions for a period of six years from the end of the financial year in which the deduction was made. The records should include the name of the deductee, the amount of tax deducted, the PAN of the deductee and the deductor, and any other relevant details.

Filing of TDS return:

The person deducting TDS is required to file a TDS return electronically with the Income Tax Department by the 31st day of July of the following financial year. The TDS return should include all the information relating to the TDS deductions made during the previous financial year.

Failure to comply with any of the obligations under Section 139A(5B) may result in a penalty of ₹10,000 for each default. Therefore, it is important for persons deducting TDS to comply with all the applicable rules and regulations.

Examples of Section 139A(5B)

Here are some examples of how Section 139A(5B) might apply:

  • An employer deducts TDS on the salary of an employee. The employer is required to furnish a TDS certificate to the employee and remit the deducted tax to the Income Tax Department. The employer is also required to maintain records of the TDS deductions made and file a TDS return.
  • A bank deducts TDS on the interest paid to a depositor. The bank is required to furnish a TDS certificate to the depositor and remit the deducted tax to the Income Tax Department. The bank is also required to maintain records of the TDS deductions made and file a TDS return.
  • A landlord deducts TDS on the rent received from a tenant. The landlord is required to furnish a TDS certificate to the tenant and remit the deducted tax to the Income Tax Department. The landlord is also required to maintain records of the TDS deductions made and file a TDS return.

(III) Obligation of a Buyer, Licensee, Lessee Referred to in Section 206C [Section 139A (5C)]

Section 139A(5C) of the Income Tax Act, 1961, mandates that a buyer, licensee, lessee referred to in Section 206C, is obliged to intimate their Permanent Account Number (PAN) to the person responsible for deducting tax at source under Chapter XVIIBB. The provisions of section 139A(5C) are applicable to following types of transactions:

  • Sale of Gold or Silver of specific purity and weight
  • Lease of land or building for residential purposes
  • Lease of land or building for non-residential purposes
  • Lease of machinery or plant for industrial purposes
  • Lease of vehicles
  • Lease of goods or services for business purposes

Obligations of a Buyer, Licensee, or Lessee

Section 206C imposes several obligations on the buyer, licensee, or lessee. Let’s explore some of the key obligations:

  1. Furnishing TCS certificate to the seller, licensor, or lessor:

The buyer, licensee, or lessee is required to furnish a TCS certificate to the seller, licensor, or lessor within 15 days from the end of the month in which the tax is deducted. The TCS certificate should be in the prescribed format and should contain all the relevant details of the deduction, such as the name of the seller, licensor, or lessor, the amount of tax deducted, and the PAN of the seller, licensor, or lessor and the buyer, licensee, or lessee.

  1. Remitting the deducted tax to the Income Tax Department:

The buyer, licensee, or lessee is required to remit the deducted tax to the Income Tax Department within 7 days from the end of the month in which the tax is deducted. The tax should be remitted through the electronic challan cum statement (ECS) system or by any other mode as specified by the Income Tax Department.

  1. Maintaining records of TCS deductions:

The buyer, licensee, or lessee is required to maintain records of all TCS deductions for a period of six years from the end of the financial year in which the deduction was made. The records should include the name of the seller, licensor, or lessor, the amount of tax deducted, the PAN of the seller, licensor, or lessor and the buyer, licensee, or lessee, and any other relevant details.

  1. Filing of TCS return:

The buyer, licensee, or lessee is required to file a TCS return electronically with the Income Tax Department by the 31st day of July of the following financial year. The TCS return should include all the information relating to the TCS deductions made during the previous financial year.

Failure to comply with any of the obligations under Section 139A(5C) may result in a penalty of ₹10,000 for each default. Therefore, it is important for buyers, licensees, or lessees who are required to deduct tax at source under section 206C to comply with all the applicable rules and regulations.

Examples of Section 139A(5C)

Here are some examples of how Section 139A(5C) might apply:

  • A buyer purchases a motor vehicle from a seller for ₹2.5 lakh. The buyer is required to deduct TCS on the purchase price. The buyer is required to furnish a TCS certificate to the seller, remit the deducted tax to the Income Tax Department, maintain records of the TCS deductions made, and file a TCS return.
  • A licensee acquires a license for a parking lot from a licensor for ₹10 lakh. The licensee is required to deduct TCS on the license fee. The licensee is required to furnish a TCS certificate to the licensor, remit the deducted tax to the Income Tax Department, maintain records of the TCS deductions made, and file a TCS return.
  • A lessee leases a commercial building from a lessor for ₹5 lakh per annum. The lessee is required to deduct TCS on the annual lease rentals. The lessee is required to furnish a TCS certificate to the lessor, remit the deducted tax to the Income Tax Department, maintain records of the TCS deductions made, and file a TCS return.

(IV) Obligation of the person responsible for collecting tax [Section 139A (5D)]:

Section 139A (5D) of the tax laws outlines the obligations of the person responsible for collecting tax. According to this section, any person who is responsible for collecting tax is required to:

  • Obtain a Tax Deduction and Collection Account Number (TAN) from the tax authorities.
  • Quote the TAN in all communications and documents related to tax collection.
  • File regular statements containing details of tax collected.
  • Deposit the tax collected to the credit of the government within the specified time.

Importance of Fulfilling Obligations

Fulfilling the obligations outlined in Section 139A (5D) is crucial for several reasons:

  1. Collecting tax:

The person collecting tax is required to collect the tax from the person liable to pay tax. The tax should be collected in cash, by cheque, by demand draft, or by any other mode as specified by the Income Tax Department.

  1. Furnishing a tax collection challan:

The person collecting tax is required to make an entry in the tax collection challan (TCC) or in any other prescribed form for the amount of tax collected. The TCC should be in the prescribed format and should contain all the relevant details of the collection, such as the name of the person liable to pay tax, the amount of tax collected, and the PAN of the person liable to pay tax.

  1. Issuing a receipt:

The person collecting tax is required to issue a receipt to the person liable to pay tax. The receipt should be in the prescribed format and should contain all the relevant details of the collection, such as the name of the person liable to pay tax, the amount of tax collected, the PAN of the person liable to pay tax, and the date of collection.

  1. Remitting the collected tax to the Income Tax Department:

The person collecting tax is required to remit the collected tax to the Income Tax Department within 7 days from the date of collection. The tax should be remitted through the electronic challan cum statement (ECS) system or by any other mode as specified by the Income Tax Department.

  1. Maintaining records of tax collections:

The person collecting tax is required to maintain records of all tax collections for a period of six years from the end of the financial year in which the collection was made. The records should include the name of the person liable to pay tax, the amount of tax collected, the PAN of the person liable to pay tax, and any other relevant details.

  1. Filing of tax collection statement: T

he person collecting tax is required to file a tax collection statement electronically with the Income Tax Department within 15 days from the end of the month in which the tax was collected. The tax collection statement should include all the information relating to the tax collections made during the previous month.

Failure to comply with any of the obligations under Section 139A(5D) may result in a penalty of ₹5,000 for each default. Therefore, it is important for persons responsible for collecting tax to comply with all the applicable rules and regulations.

Examples of Section 139A(5D)

Here are some examples of how Section 139A(5D) might apply:

  • A telecom service provider collects tax from its subscribers on their mobile phone bills. The telecom service provider is required to collect the tax, make an entry in the TCC, issue a receipt, remit the collected tax to the Income Tax Department, maintain records of tax collections, and file a tax collection statement.
  • A person who operates a hotel collects tax from its guests on their hotel bills. The person operating the hotel is required to collect the tax, make an entry in the TCC, issue a receipt, remit the collected tax to the Income Tax Department, maintain records of tax collections, and file a tax collection statement.
  • A person who sells goods and services on an e-commerce platform collects tax from its customers on the goods and services purchased through the platform. The person selling goods and services on the e-commerce platform is required to collect the tax, make an entry in the TCC, issue a receipt, remit the collected tax to the Income Tax Department, maintain records of tax collections, and file a tax collection statement.

10. Inter-changeability of PAN & Aadhaar and Mandatory Quoting in Prescribed Transactions [Section 139A (5E) and Rule 114(1A), (1B) and (1C)]

Section 139A(5E) of the Income Tax Act, 1961, provides that any person who is required to quote his PAN under the Act, and who has not been allotted a PAN but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar number in lieu of PAN, and such person shall be allotted a PAN in the prescribed manner.

This means that PAN and Aadhaar are interchangeable for prescribed transactions. However, it is important to note that the person is still required to obtain a PAN, even if he has quoted his Aadhaar number. The PAN will be allotted to the person in the prescribed manner.

Mandatory Quoting in Prescribed Transactions [Section 139A(5E)]

Section 139A(5E) of the Income Tax Act, 1961, makes it mandatory for any person who enters into a prescribed transaction to quote their PAN or Aadhaar number. The prescribed transactions include:

  • Payment of taxes
  • Opening a bank account
  • Purchase of foreign currency
  • Withdrawal of cash from a bank account
  • Sale of immovable property
  • Purchase of motor vehicles
  • Payment of rent
  • Opening a demat account
  • Sale or purchase of immovable property for a consideration of Rs. 5 lakhs or more.
  • Sale or purchase of jewelry or precious metals for a consideration of Rs. 2 lakhs or more.
  • Sale or purchase of foreign currency for a consideration of Rs. 50,000 or more.

If a person fails to quote his PAN or Aadhaar number for a prescribed transaction, he may be liable to a penalty of Rs. 10,000.

Benefits of Interchangeability

The interchangeability of PAN and Aadhaar has several benefits, including:

  • It simplifies the process of filing income tax returns and other tax-related transactions.
  • It reduces the burden on taxpayers of having to remember and maintain multiple identification numbers.
  • It helps to prevent tax evasion by linking PAN and Aadhaar numbers.

Rule 114(1A), (1B) and (1C) have been inserted w.e.f. 1.9.2019

Rule 114(1A), (1B) and (1C) were inserted into the Income Tax Act, 1961, with effect from September 1, 2019. These rules deal with the linking of Aadhaar numbers with Permanent Account Numbers (PANs).

Amendment: Rule 114(1A)

Rule 114(1A) states that any person who has not been allotted a PAN but possesses an Aadhaar number and has furnished or intimated or quoted their Aadhaar number in lieu of the PAN in accordance with sub-section (5E) of section 139A shall be deemed to have applied for allotment of a PAN and they shall not be required to apply or submit any documents under this rule.

Amendment: Rule 114(1B)

Rule 114(1B) states that any person who has not been allotted a PAN but possesses an Aadhaar number may apply for allotment of the PAN under sub-section (1) or sub-section (1A) or sub-section (3) of section 139A to the authorities mentioned in sub-rule (2) by intimating their Aadhaar number and they shall not be required to apply or submit any documents under this rule.

Amendment: Rule 114(1C)

Rule 114(1C) states that the PAN allotted to a person under sub-rule (1A) or sub-rule (1B) shall be linked with their Aadhaar number and the person shall not be required to furnish their PAN separately for any purpose under the Income Tax Act, 1961.

These rules were inserted to simplify the process of obtaining a PAN and to make it more convenient for taxpayers to comply with the PAN requirements.

Here are some of the key benefits of these rules:

  • Reduced paperwork: Taxpayers who have an Aadhaar number are no longer required to submit any documents to apply for a PAN.
  • Ease of application: Taxpayers can apply for a PAN online or through an SMS facility.
  • Faster processing: The processing time for PAN applications has been reduced.

As a result of these rules, the number of PAN applications has increased significantly. The CBDT has also taken steps to improve the quality of PAN data and to reduce the number of duplicate PANs.

11.  Quoting and Authentication of PAN in the Documents pertaining to Prescribed Transactions [Section 139A (6A]

Effective from September 1, 2019, the Income Tax Department has implemented a new provision under Section 139A (6A) that mandates the quoting and authentication of Permanent Account Number (PAN) in specific documents related to prescribed transactions. This move is aimed at ensuring transparency and accountability in financial transactions and preventing tax evasion. The provision applies to both resident and non-resident taxpayers who are eligible for a PAN.

Prescribed Transactions

The prescribed transactions that require the quoting and authentication of PAN include:

  • Opening a bank account
  • Applying for a credit or debit card
  • Opening a demat account
  • Making investments above a specified threshold
  • Purchasing or selling immovable property
  • Entering into specified financial transactions as notified by the government

Authentication of PAN

There are two ways to authenticate PAN:

  • Electronic authentication: You can authenticate your PAN electronically by linking it with your Aadhaar number. This can be done online or through the PAN Verification App.
  • Physical authentication: You can authenticate your PAN physically by submitting a copy of your PAN card to the person or entity with whom you are entering into the prescribed transaction.

The authentication process aims to ensure the accuracy and reliability of the PAN information provided by the taxpayer. It helps in minimizing the chances of fraudulent activities and impersonation.

Consequences of Non-Compliance

Failure to comply with the provisions of Section 139A (6A) can lead to various consequences, including:

  • Rejection of the transaction
  • Imposition of penalties or fines
  • Disallowance of certain deductions or exemptions
  • Initiation of legal proceedings

It is important for taxpayers to ensure that they comply with the requirement of quoting and authenticating PAN in the prescribed transactions to avoid any legal or financial repercussions.

Additional Points to Note

Here are some additional points to note:

  • You are not required to quote your PAN if you do not have one. However, you will need to furnish a declaration in Form 60.
  • If you are a foreign citizen, you are not required to quote your PAN.
  • If you are entering into a prescribed transaction on behalf of another person, you are responsible for quoting and authenticating that person’s PAN.

12. Person receiving the Documents pertaining to Prescribed Transactions to ensure PAN or Aadhaar Number has been duly Quoted and Authenticated [Section 139A (6B)]

Section 139A (6B) of the Income Tax Act was introduced to make it obligatory for the person receiving documents pertaining to prescribed transactions to verify the PAN or Aadhaar number mentioned in those documents. The objective is to establish the authenticity and accuracy of the information provided, thereby reducing the chances of tax fraud.

Prescribed transactions refer to specific financial activities that are subject to this verification requirement. These transactions can include but are not limited to:

  • Opening a bank account
  • Applying for a loan
  • Investing in securities
  • Purchasing or selling immovable property
  • Entering into certain contracts

The person receiving the documents is responsible for:

  • Checking that the PAN or Aadhaar number has been quoted in the document.
  • Verifying that the PAN or Aadhaar number is correct.
  • Ensuring that the PAN or Aadhaar number has been authenticated.

If the person receiving the documents fails to comply with Section 139A(6B), they may be liable to a penalty of Rs. 10,000.

Additional Points To Note

Here are some additional points to note:

  1. You are not required to ensure that the PAN or Aadhaar number has been duly quoted and authenticated if you do not have one. However, you will need to furnish a declaration in Form 60.
  2. If you are a foreign citizen, you are not required to ensure that the PAN or Aadhaar number has been duly quoted and authenticated.
  3. If you are receiving a document relating to a prescribed transaction on behalf of another person, you are responsible for ensuring that that person’s PAN or Aadhaar number has been duly quoted and authenticated in the document.

13. Quoting and Intimating PAN which is False [Section 272B (2)]

Section 272B (2) of the Income Tax Act states that if a person quotes or intimates a false PAN, they may be liable to pay a penalty of INR 10,000. The provision aims to deter individuals from providing incorrect or misleading PAN information, which can have serious implications for the tax system.

It is important to note that the penalty under Section 272B (2) is applicable when a person knowingly quotes or intimates a false PAN. This means that if an individual unintentionally provides incorrect PAN information due to a genuine mistake, they may not be subject to the penalty.

Examples of quoting or intimating a false PAN

  • Quoting a PAN that has been allotted to another person
  • Quoting a PAN that has been canceled
  • Quoting a PAN that has been generated using fake or incorrect information
  • Intimating a PAN to the Income Tax Department even though you have not been allotted a PAN

Consequences of Quoting and Intimating a False PAN

Quoting or intimating a false PAN can have several consequences, both legal and financial. Let’s take a closer look at some of these consequences:

  • Penalty:

As mentioned earlier, the penalty for quoting or intimating a false PAN is INR 10,000. This penalty is in addition to any other taxes or penalties that may be applicable.

  • Legal Proceedings:

Intentionally providing false PAN information can lead to legal proceedings. The individual may be required to appear before the tax authorities and provide an explanation for their actions.

  • Loss of Credibility:

Quoting or intimating a false PAN can damage an individual’s credibility and reputation. It may raise suspicions about their financial integrity and make it challenging for them to establish trust with financial institutions or potential business partners.

  • Difficulty in Future Transactions:

Incorrect PAN information can create hurdles in future financial transactions. Banks, financial institutions, and other organizations may reject applications or transactions that involve a false PAN.

Preventing Mistakes and Ensuring Compliance

To avoid the consequences of quoting and intimating a false PAN, individuals should take the following precautions:

  • Double-Check Information:

Before providing PAN details, individuals should verify the accuracy of the information. This includes cross-checking the PAN number, name, and other relevant details.

  • Seek Professional Assistance:

If individuals are unsure about their PAN details or have any doubts, they should seek professional assistance from a chartered accountant or tax consultant.

  • Keep PAN Information Secure:

It is essential to keep PAN information confidential and secure. Individuals should avoid sharing their PAN details with unauthorized individuals or entities.

  • Update PAN Information:

If there are any changes or updates to the PAN details, individuals should promptly inform the Income Tax Department and update their records.

Failure to quote and authenticate PAN or Aadhaar in case of Prescribed Transactions [Section 272B (2A)]

Section 272B(2A) of the Income Tax Act, 1961, deals with the penalty for failing to quote and authenticate a PAN or Aadhaar number in the documents pertaining to prescribed transactions. According to this provision, if any person who is required to quote his or her PAN or Aadhaar number, as the case may be, in the documents referred to in sub-section (6A) of section 139A or authenticate such number in accordance with the provisions of the said sub-section, fails to do so, he or she shall be liable to a penalty of Rs. 10,000 for each such default.

Section 272B(2A) is intended to encourage people to comply with the requirement to quote and authenticate PAN or Aadhaar numbers for prescribed transactions. By imposing a penalty for non-compliance, the government hopes to deter people from evading taxes by not reporting high-value transactions.

Failure to ensure that person receiving the Document pertaining to Prescribed Transactions has duly quoted and authenticated the PAN or Aadhaar [Section 272B (2B)]

Section 272B(2B) states that every person receiving any document relating to a prescribed transaction shall ensure that the Permanent Account Number (PAN) or the Aadhaar number, as the case may be, has been duly quoted and authenticated in the document. In simpler terms, this means that anyone who receives a document related to a prescribed transaction must make sure that the person entering into the transaction has correctly quoted and authenticated their PAN or Aadhaar number on the document.

Section 272B(2B) was introduced to help the Income Tax Department track high-value transactions and prevent tax evasion. By requiring the person receiving the documents to verify that the PAN or Aadhaar number has been duly quoted and authenticated, the Income Tax Department can more easily identify transactions that need to be further investigated.

If you fail to ensure that the PAN or Aadhaar number has been duly quoted and authenticated in a document relating to a prescribed transaction, you may be liable to a penalty of Rs. 10,000.

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