PAN is essential for all entities and individuals. It is not just used by the Income Tax Authority to track tax payments, but is now needed for investments as well.

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To start a new bank account or even an account on investment platforms like Groww, PAN card is necessary.

To save tax, people invest a large amount in tax-saving mutual funds.

Therefore, a person needs to give his PAN details when he is buying mutual fund units, debentures and bonds. The PAN details are also required when you want to open a demat account.

If an investor is investing for the first time in mutual funds, ensure that he or she holds a PAN.

Is PAN Necessary for Investment?

PAN is also needed to get a KYC (Know Your Customer) compliance. KYC is compulsory to invest in stocks markets and mutual funds.

An investor investing for the first time with a fund house has to do a KYC with that fund house. This means that every time an investor is investing with a different fund house, he will have to do a KYC with that fund house and he will have to give a self-attested copy of the PAN card.

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Previously, mutual fund transactions of more than Rs 50,000 needed PAN to be furnished. But now, all mutual fund transactions require PAN.

All investors, including the guardians in the case of minors, have to submit their PAN to the Asset Management Company they are investing in.

In case of joint holders also both the holders have to furnish a copy of the PAN card to the AMC they are investing in. But this is required only for the first time an investor is investing in a fund house.

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Post that any transaction done with that particular fund house will not need PAN.

Non-resident Indians who plan to invest in mutual funds in India will also have to furnish their PAN. In case an investor had invested in mutual funds few years back when PAN was not mandatory, his or her periodic accounts statement will state that his PAN has not been verified.

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In such a scenario, he needs to submit a copy of his PAN along with the original copies for verification. If he does not furnish his PAN, then he will not be able to make any more investments or switch from one fund to the other.

The above-mentioned rule of furnishing the PAN for investment is also applicable for those individuals who are not paying tax.

Even if the regular income is below the tax slab and the individual has never ever paid tax, still he needs to furnish his PAN for investing in mutual funds.

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If the individual does not have a PAN, then he/she should apply for one, because PAN is needed not just for investment and income tax filing but has many other uses in day to day activities.

Investors from Sikkim are exempt from furnishing their PAN while investing in mutual funds.

In 2008, the Securities Exchange Board of India exempted investors residing in Sikkim from the compulsion of furnishing of PAN for their investments in mutual funds.

But these investors have to identity proof and documentary evidence of being residents of Sikkim.

What is PAN?

PAN is known as permanent account number, which is a unique 10-digit alphanumeric identity allotted to each taxpayer by the Income Tax Department under the supervision of the Central Board of Direct Taxes.

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It is highly recommended that you should have a PAN even if your income does not fall within the taxable brackets. It is also compulsary for businesses to have a PAN card if their turnover or gross receipt is more than Rs 5 lakhs in the previous financial year.

Other Benefits of PAN

Following is the list of things where PAN is needed:

  • IT Returns Filing
  • Identity Proof
  • Tax Deductions
  • bank account:
  • Claiming Income Tax Refund
  • Starting a Business
  • Opening Bank Account
  • Opening Demat Account
  • Immovable Assets
  • Foreign Travel
  • Time Deposit
  • Hotel and restaurant bills
  • Cash cards and pre-paid instruments
  • Purchase or sale of Goods and Services

Conclusion

Investors who already have PAN can start investing in mutual funds. But investors who do not have PAN card and plan to invest in mutual funds then he or she can do so by applying for a new PAN card.

Once they get the PAN card their investment in mutual funds can start.

To know about how to apply for a new PAN card, click here