Showing PAN-Aadhaar for Covid treatment not practical: Experts

The income tax (I-T) department's condition of furnishing permanent account number (PAN) or Aadhaar number of both the patient and payee for making cash payments for Covid treatment has drawn flak from experts.

According to them, it would have been more effective if the exemption (in cash payment) had been given without any caveats and for a longer period.

On Friday, the Central Board of Direct Taxes (CBDT) had said that hospitals, nursing homes, Covid care centres, or similar medical facilities providing treatment for coronavirus can accept cash payment of Rs 2 lakh or more till May 31. This can be done only after receiving valid identity proof such as PAN card or Aadhaar of the patient and by informing about the relationship between the patient and the payee.

At present, the I-T Act restricts any person from receiving an amount of Rs 2 lakh or more in cash, from a person in a day, in respect to a single transaction or in respect to transactions relating to one event or occasion from a person. In case of violation, it attracts 100 per cent penalty on the amount taken in cash.

The tax department is of the opinion that the exemption would help patients get timely treatment and also encourage transparent billing by hospitals in case of cash receipt. Tax experts, however, feel that such caveats may discourage people from helping critical patients out of fear of getting scrutinised later by the tax department.

The circular allows people to pay hospital bills in cash but they may have to explain the source, if income later doesn't match with the returns of the payer. Also, it may create confusion as there could be cases where not one but many relatives will be contributing for the treatment of one patient. Besides, the circular did not clarify about foreign donations.

Sanjay Sanghvi, direct tax partner, Khaitan & Co, said, “While this exemption by CBDT is certainly positive, it would have been better if PAN-Aadhaar was not required to be furnished, at least up to Rs 5 lakh. Also, why confine this relaxation only to two months (April-May) and not for, say, six months?”“Relaxation for hospitals / other facilities providing Covid treatment to take a payment in cash exceeding Rs 2 lakh during the months of April and May 2021 is a welcome step. However, the condition of providing PAN/Aadhaar of the patient/payee should have been avoided," said Vivek Sharma, a Delhi-based lawyer.

“A senseless circular in the most sensitive times. Now, expect people to go on a wild goose chase to procure PAN, Aadhaar and source documents for all cash loans taken from many Good Samaritans for treating their near and dear ones,” said Srinivas Kotni, managing partner, Lexport, a tax firm.

Section 269SS and 271D of I-T the Act (deals with cash payments and penalty) was introduced by the government in 2017, post note ban, to discourage black money generation.

However, before this, there was already an existing provision for restricting cash payments above Rs 20,000 for business purposes.

This provision has also been amended and now cash payments above Rs 10,000 will not be allowed as expense in the income tax return.