Income Tax Act 1961 Section 276AA

Income Tax Act Section 276AA deals with the mandatory quoting of Permanent Account Number (PAN) in specified financial transactions. It is a crucial compliance provision aimed at enhancing transparency and tracking of financial dealings for tax purposes. Taxpayers, professionals, and businesses must understand this section to avoid penalties and ensure smooth financial operations.

This section primarily concerns compliance duties related to tax identification and reporting. It helps the Income Tax Department monitor transactions, prevent tax evasion, and maintain accurate records. Understanding Section 276AA is essential for anyone involved in financial transactions subject to PAN requirements.

Income Tax Act Section 276AA – Exact Provision

This provision mandates quoting PAN in certain financial transactions. Failure to do so attracts a penalty of ₹10,000. The rule ensures that all significant transactions are traceable through PAN, facilitating better tax administration and compliance.

• Penalty of ₹10,000 for not quoting PAN.

• Applies to specified financial transactions.

• Enhances transparency and tracking.

• Mandatory for individuals and entities involved.

• Supports tax compliance and enforcement.

Explanation of Income Tax Act Section 276AA

This section requires quoting PAN in specified transactions to link them with the taxpayer’s identity.

• States that failure to quote PAN attracts penalty.

• Applies to individuals, firms, companies, and other entities.

• Relevant for transactions like sale/purchase of immovable property, investments, and banking.

• Triggers penalty upon non-quotation of PAN.

• Allows no exemption from penalty once PAN is not quoted.

Purpose and Rationale of Income Tax Act Section 276AA

The section aims to ensure tax compliance by linking financial transactions to PAN, preventing tax evasion and promoting transparency.

• Ensures traceability of financial transactions.

• Prevents tax evasion and black money circulation.

• Encourages taxpayers to disclose PAN timely.

• Supports efficient tax administration and revenue collection.

When Income Tax Act Section 276AA Applies

This section applies whenever specified financial transactions occur without quoting PAN during any financial year.

• Relevant in the financial year of the transaction.

• Applies to transactions like property deals, investments, and banking.

• Applicable regardless of residential status if transaction is within India.

• Exceptions may exist for certain small-value transactions.

Tax Treatment and Legal Effect under Income Tax Act Section 276AA

Failure to quote PAN does not affect the taxability of income but triggers a penalty. The section enforces compliance rather than altering income computation.

It does not provide exemption or deduction but imposes a monetary penalty. The penalty is independent of other tax liabilities and is a compliance cost for non-adherence.

• Penalty imposed for non-quotation of PAN.

• No impact on income computation directly.

• Works alongside other tax provisions for compliance.

Nature of Obligation or Benefit under Income Tax Act Section 276AA

The section creates a mandatory compliance obligation to quote PAN in specified transactions. It does not confer benefits but imposes penalties for non-compliance.

All persons undertaking specified transactions must comply. The obligation is mandatory and unconditional, with no discretion to avoid quoting PAN.

• Mandatory compliance duty.

• Applies to all specified transaction parties.

• Penalty for non-compliance.

• No direct tax benefit or exemption.

Stage of Tax Process Where Section Applies

Section 276AA applies at the stage of undertaking specified financial transactions and reporting them.

• During transaction execution (e.g., sale, purchase, investment).

• At the time of filing specified forms or returns.

• During tax audits or assessments if PAN is missing.

• Penalty imposed upon detection of non-quotation.

Penalties, Interest, or Consequences under Income Tax Act Section 276AA

The primary consequence is a penalty of ₹10,000 for failure to quote PAN. There is no interest or prosecution under this section, but non-compliance may trigger scrutiny.

• Penalty of ₹10,000 for non-quotation.

• No interest charged under this section.

• Non-compliance may lead to further tax scrutiny.

• Repeated defaults may attract stricter enforcement.

Example of Income Tax Act Section 276AA in Practical Use

Assessee X sells a property worth ₹50 lakhs but fails to quote PAN in the sale deed. The buyer also omits quoting PAN. Both parties become liable to pay a penalty of ₹10,000 each under Section 276AA. This ensures that large transactions are linked to PAN for tax tracking.

• Penalty enforces PAN quoting in property transactions.

• Ensures transparency and compliance for high-value deals.

Historical Background of Income Tax Act Section 276AA

Introduced to strengthen tax compliance, Section 276AA was added to mandate PAN quoting in key transactions. Amendments over years expanded the list of specified transactions and increased enforcement rigor.

• Introduced to curb tax evasion via untraceable transactions.

• Expanded by Finance Acts to cover more transactions.

• Judicial interpretations emphasize strict compliance.

Modern Relevance of Income Tax Act Section 276AA

In 2026, with digital tax filings and faceless assessments, Section 276AA remains vital. PAN quoting is integrated into electronic forms and TDS returns, enhancing automated compliance and reducing manual errors.

• Mandatory digital PAN quoting in e-forms and returns.

• Supports faceless assessments and AIS reporting.

• Critical for individuals and businesses in digital tax ecosystem.

Related Sections

• Income Tax Act Section 4 – Charging section.

• Income Tax Act Section 139 – Filing of returns.

• Income Tax Act Section 194A – TDS on interest.

• Income Tax Act Section 206AA – Mandatory PAN for TDS.

• Income Tax Act Section 234E – Fee for TDS return delay.

• Income Tax Act Section 271F – Penalty for failure to furnish return.

Case References under Income Tax Act Section 276AA

No landmark case directly interprets this section as of 2026.

Key Facts Summary for Income Tax Act Section 276AA

• Section: 276AA

• Title: PAN Quoting Requirement in Specified Transactions

• Category: Compliance, Penalty

• Applies To: Individuals, Firms, Companies, Deductors, Assessees

• Tax Impact: Penalty of ₹10,000 for non-quotation

• Compliance Requirement: Mandatory PAN quoting in specified transactions

• Related Forms/Returns: Various transaction-specific forms, TDS returns

Conclusion on Income Tax Act Section 276AA

Section 276AA plays a crucial role in the Indian tax system by mandating the quoting of PAN in specified financial transactions. This requirement enhances transparency, helps prevent tax evasion, and strengthens the tax administration's ability to track financial activities.

Taxpayers and businesses must comply with this provision to avoid penalties and ensure smooth processing of transactions. With increasing digitization, the importance of Section 276AA continues to grow, making it essential knowledge for all stakeholders in the financial ecosystem.

FAQs on Income Tax Act Section 276AA

What is the penalty for not quoting PAN under Section 276AA?

The penalty for failing to quote PAN in specified financial transactions is ₹10,000. This penalty is imposed to enforce compliance and ensure traceability of transactions for tax purposes.

Who must comply with Section 276AA?

All individuals, firms, companies, and entities involved in specified financial transactions must quote their PAN. This includes buyers, sellers, investors, and deductors as applicable.

Does Section 276AA affect income tax calculation?

No, Section 276AA does not affect income tax computation. It only imposes a penalty for non-quotation of PAN in specified transactions, focusing on compliance rather than taxation.

Are there any exceptions to quoting PAN under this section?

Some small-value transactions may be exempted, but generally, quoting PAN is mandatory for all specified transactions. Specific exemptions are notified by the government from time to time.

How does Section 276AA relate to digital tax compliance?

Section 276AA is integrated into digital tax processes, requiring PAN quoting in electronic forms and TDS returns. This supports faceless assessments and automated compliance in the modern tax environment.