Permanent Account Number (PAN) is a 10-digit alphanumeric identification number (including both alphabets and numbers) issued to Indians, primarily to those who pay taxes. All tax-related information of a person is recorded against a single PAN number, which serves as the primary key for information storage. No two persons or tax-paying businesses can have the same PAN.
When a PAN is assigned to an organization, the Income Tax Department also issues a PAN Card. While your PAN is a number, your PAN Card is a tangible card that includes your PAN number and your name, date of birth (DoB), and photo. Copies of this card can be used as proof of identification or birth certificate.
History of PAN Card in India
Before introducing the PAN Card, taxpayers were allocated a GIR number. This was a manual system that was unique only under the supervision of a specific evaluating officer. However, the figure was not unique at the national level. Hence, there was a larger risk of miscalculation and mistakes, as well as incidents of mistaken identity during tax assessment.
The idea of PAN was introduced by the Indian government in 1972 and made statutory under section 139A of the Income Tax Act of 1961. PAN was initially optional and made mandatory for all tax-paying persons in 1976.
PAN Number Format
1) The full name of the cardholder.
2) The cardholder’s father’s name.
3) Pan number digits: it has a 10-digit alphanumeric permanent account number.
4) Sign of the cardholder.
5) Date of birth.
6) A photograph of the cardholder.
7) The hologram of the Government of India along with the tag of the Income Tax Department.
Details Included in PAN Card
PAN cards carry information such as identification and age evidence and adhere to Know Your Customer (KYC) rules. The following are the PAN card details:
- Individual/Company Name of the Cardholder
- Name of the cardholder's father — Only applicable to individual cardholders.
- Date of birth — In the case of a person, the cardholder's date of birth is specified, whereas, in the case of a corporation or corporation, the date of registration is specified.
- PAN Number — It is a ten-character alpha-numeric number, with each character representing unique information about the cardholder.
- The first three letters are strictly alphabetical, including three letters from A to Z.
- The fourth letter reflects the taxpayer's category.
The followings are the numerous entities and their corresponding characters:
- A – Association of Persons
- B – Body of Individuals
- C – Company
- F – Firms
- G – Government
- H – Hindu Undivided Family
- L – Local Authority
- J – Artificial Judicial Person
- P – Individual
- T – Association of Persons for a Trust
- The fifth letter is the individual's surname's initial letter.
- The remaining letters and characters are chosen at random. The first four characters are numerals, while the final one is an alphabet.
- Individual signature - The PAN Card also serves as verification of the individual's signature, which is essential for financial transactions.
- Individual photograph - The PAN serves as visual identification evidence for the individual. In the case of corporations and firms, there is no portrait on the card.
Who Can Apply for a PAN Card?
The following are the entities that are required to hold a PAN card-
- Individuals whose income surpasses the income tax slabs' beginning point.
- Individuals who earn taxable money for the benefit of others (such as earnings of a minor).
- Individuals with a profession or a business with an annual income or sale of more than Rs.5 lakh.
- Individuals who have registered under a union territory or state's general sales tax law or the Central Sales Tax Act.
- Anyone who engages in financial operations that necessitate the provision of PAN card information.
- Section 139 requires charitable trusts to make returns (4A).
- Importers and exporters in need of an Import/Export code.
- Individuals who must pay excise duty.
- Individuals who get paid after TDS has been deducted.
- Individuals and their representatives are liable to pay service tax.
- Individuals who issue invoices in accordance with Rule 57AE.
Uses of PAN Card
- When paying direct taxes, the PAN must be quoted.
- When filing income tax, taxpayers must include their PAN.
- PAN information must be provided while registering a business.
- PAN information is required for many financial operations. These are some of the financial services where one has to submit their pan card details:
- Purchase or sale of property (immovable) of Rs.5 lakh or more
- Purchase or sale of a vehicle other than a two-wheeler
- Payments made to hotels and restaurants that exceed Rs.25,000
- Payments paid in conjunction with international travel needs. If the sum in this scenario exceeds Rs.25,000, you must provide your PAN.
- Payments in excess of Rs.50,000 for bank deposits
- Purchase of bonds worth at least Rs.50,000
- Buying of shares worth at least Rs.50,000
- Purchase of an Rs.50,000 or more insurance policy
- Investing in mutual funds
- Payments of more than Rs.5 lakh made for the acquisition of jewelry and bullion
- To transfer funds out of India
- Transferring money from an NRE account to an NRO account
Why is PAN Card Important?
Here are a few important reasons why you should get a PAN card:
- PAN card acts as legal identity verification and photo for various purposes, including obtaining a gas connection and opening a bank account.
- Banking: A PAN card is required to open a bank account and other banking-associated financial operations. It is now required in order to combat fraud and money laundering. Cash deposits of more than Rs. 50,000 daily necessitate submitting PAN card information. Fixed deposits over Rs. 50,000 also necessitate submitting PAN card information.
- Debit/credit card applications: PAN information is also required for debit/credit card applications. Applications that are rejected due to a lack of PAN card information or other factors may negatively influence your credit score.
- Loan applications: PAN card information is required for all types of loan applications.
- Buying/selling property: If the value of the immovable property exceeds Rs. 5 lakhs, the buyer and seller's PAN card details are required by law for any type of property transaction, sale, or purchase. In the case of joint ownership, the PAN card numbers of all owners are required.
- Purchasing jewellery: PAN data must be submitted when purchasing any jewelry or bullion worth more than Rs. 5 lakhs.
- Post office deposits: PAN data are also required when opening Post office deposits in excess of Rs. 50,000.
- Payment wallets: Digital payment wallets also require PAN card information if monthly transactions surpass Rs. 20,000.
- Purchasing Vehicles: Except for two-wheelers, PAN card information is required to sell or purchase all vehicles.
- PAN card details must also be submitted to the broker, Demat, and trading account provider while trading shares.
- Mutual funds: PAN card information is also required for bonds, debentures, or mutual funds investments.
- Insurance premiums: If your insurance premiums surpass Rs. 50,000 in a fiscal year, you must additionally provide PAN card information.
- Foreign currency exchange: PAN card information is also necessary when exchanging local currency for foreign currency.
- In seeking employment, Most workplaces want your PAN card information for salary accounting and tax purposes. It is also required when filing an ITR.
Benefits of PAN Card
- IT Returns Filing: All individuals and entities who are eligible for Income tax are expected to file their IT returns. A PAN card is necessary for filing of IT returns, and is the primary reason individuals, as well as other entities, apply for one.
- Identity Proof: PAN card serves a valid identity proof. Other than voter card, Aadhaar card, PAN card is also accepted by all financial institutions and other organisations as an identity proof.
- Tax Deductions: One of the important reasons to get a PAN card is for taxation. If the entity or person has not linked the PAN number with his bank account, and the annual interest earnings on savings deposits are more than Rs. 10,000/- then the bank would deduct 30% TDS instead of 10%.
- Claiming Income Tax Refund: Many times, the TDS deducted from a taxpayer’s income is more than the actual tax that he is supposed to pay. In order to claim excess tax paid, taxpayer has to have a PAN linked to his bank account.
- Starting a Business: In order to start a business, a company or any other entity mandatorily needs to have a PAN registered in the name of its entity. Tax Registration Number (TRN) is needed for a business which is obtained only if the entity has a PAN.