Understanding the Permanent Account Number (PAN)
As mentioned above, the PAN is a combination of 10 characters. This combination can be explained as follows:
The first 3 characters are alphabetic and can be any combination from the English alphabet.
The fourth character is also an alphabet which denotes the category of the taxpayer. The categories are as follows:
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 character is also an alphabet and it denotes the first character of the cardholder’s surname.
The next four characters are numeric and are random in nature.
The last character is an alphabet again.
Types of PAN Cards In India
PAN cards are issued to different tax-paying entities. Based on that, the types of PAN are:
PAN Card for Indian Individuals
PAN Card for Indian Companies
PAN for Foreign Citizens
PAN for Foreign Companies
PAN Cards issued to individuals have the person's photograph, name, father's name, date of birth, signature, an authenticity hologram, QR Code, date of issue of the PAN, and the Permanent Account Number. PAN Cards issued to companies have the name of the company, its date of registration, the PAN number, hologram, QR Code, and date of issue of PAN. It will not have a photograph or signature.
Documents Required to Apply for a PAN Card
To apply for a PAN Card, you will have to submit a host of documents including Form 49A or 49AA. Given below is the list of documents you will have to submit while applying for a PAN Card:
If you are an Individual Applicant
Proof of identity such as Aadhaar, Voter ID, Driving License, etc.
Proof of address such as utility bill, water bill, bank account statement, statement of your credit card, Passport, Driving License, Domicile certificate issued by the Government, certificate of marriage, matriculation certificate, etc.
If you belong to a Hindu Undivided Family (HUF)
You will have to submit an affidavit issued by the Karta of the HUF. The affidavit must clearly mention the name, address, and every coparcener father’s name.
If you belong to HUF and is individually applying for a PAN Card, then you will have to submit the proof of identity, proof of address, and date of birth proof.
For Companies Registered in India
Firms and Limited Liability Partnerships Registered or Formed in India
For Trusts Formed or Registered in India
For Association of Persons
Applicants who are not Citizens of India
Proof of identity such as a Copy of PIO issued by the Government of India, Copy of OCI issued by the Government of India, Passport Copy, etc.
Proof of Address can be bank statement of the residential country, NRE Bank statement, Copy of VISA granted by an Indian company, registration certificate issued by FRO, etc.
Why is PAN Important in India? –Uses and Benefits of Having a PAN Card
PAN Card is important for taxpayers as it is necessary for all financial transactions and is used to track the inflow and outflow of your money. It is important when paying income tax, receiving tax refunds, and receiving communication from the Income Tax Department.
The Indian Budget 2019 proposed that individuals who do not have a PAN can use their Aadhaar number to file returns and for any other purpose where PAN was earlier mandatory. This means that if you did not link pan with aadhar yet, or do not have a PAN but have an Aadhaar, you don't have to either link PAN and Aadhaar, or apply for a new Pan Card. However, the rules about this are still in the process of creation/updation/approval.
That said, PAN continues to be necessary for a large number of monetary transactions. PAN Card also serves as proof of identity. Given below are some of the uses and advantages of having a PAN.
Uses of PAN in Financial Transactions
PAN needs to be quoted while paying direct taxes.
Taxpayers need to input their PAN when paying income tax.
While registering a business, PAN information needs to be furnished.
A lot of financial transactions require PAN information. Some of these transactions are:
General Uses/Advantages of Having PAN
Since PAN Card contains information such as Name, Age and photograph, it can be used throughout the country as a valid identity proof.
PAN is the best possible way to keep track of your tax payment. Otherwise, you might be required to pay it multiples times since your tax payment cannot be verified.
Since PAN is unique for every entity, its misuse is almost impossible for purposes of tax evasion or other devious means.
PAN Card can be used to avail utility connections such as electricity bill, telephone, LPG, and internet.
Who Should Get PAN? – PAN Card Eligibility
Under section 139A of the Income Tax Act, the following taxpaying entities are required to have a Permanent Account Number:
Any person who has paid tax or is liable to pay tax to the Income Tax Department. This will be decided based on the tax slabs.
Any person who is carrying out a business or professional practice which earns him a yearly turnover of more than Rs.5 lakh in any year of assessment.
Importers and exporters who are liable to pay any form of tax or duty charges as per the Income Tax Act or as per any prevalent law
All kinds of trusts, charitable organizations, and associations.
All tax paying entities – minors, individuals, HUFs, partnerships, companies, body of individuals, trusts, and others – should apply for PAN.
PAN Card Application Do's and Don'ts
Fill in all the details as per the identity and address proof documents you are submitting.
Get your thumb impression attested by a Magistrate/Notary before submitting the form, to avoid disqualification.
Write the complete address and provide accurate contact details in the form.
Fill in the application form in capital letters.
Don't make corrections or over-write anywhere on the form.
Do not use initials in the first name or last name columns.
Do not apply for a new PAN card if your old PAN card is lost/stolen/defaced. Request for a duplicate PAN instead.
Please attach two recent colour photographs with dimensions of 3.5 cm X 2.5 cm.
As required by Rule 114(4) of the Income Tax Rules, 1962, please include proof of identity (POI) and proof of address (POA). The POA must include the address listed on the application.
Fill out column 14 of the application form with the representative assessee's information (if applicable).
In case Representative Assessee is appointed, provide their identity proof and address proof.
Include your phone number and email address on the application form.
Make sure to enter the right ZIP code in the address field.
Never staple or pin the photograph.
Never submit address proof or identity proof that are not in the applicant's name.
Ensure that you are not using initials or abbreviating your name.
Don't fill in the box with any other information besides your signature, such as a date, designation, rank, etc.
A PAN card acts as an important document which you can use for various purposes. Not only it is a nationally accepted identity proof but it is also an important document while filing income tax (IT) returns. Apart from this it is also used to perform various personal and business transactions.
The following are the list of transactions which can be done only if you have your PAN card:
Opening a bank account
Filing your IT returns
Applying for a loan
Applying for a gas or telephone connection
Purchasing or selling a new property
Getting a debit card or credit card
Opening a fixed deposit account
Making insurance premium payments
Tracking PAN Transactions
The government recently unveiled a programme by which it can track transactions made through a PAN card for the purpose of calculating tax. Known as the Income Tax Business Application-Permanent Account Number or ITBAN-PAN, it will enable the Income Tax Department to track every transaction made where a particular PAN number was quoted.
All financial transactions such as mergers, acquisitions, liquidation, and amalgamation of PAN as well as dissolution information where a particular PAN card was quoted can be traced through the software.
All existing PAN information and the entire database of PAN information have also been moved to this software.
What Happens if you don't have PAN Card?
If your income falls in the taxable bracket, not having a PAN card would result in:
Flat 30% tax on your earnings and wealth, as stipulated by the Income Tax Department of India . This rule applies to individuals, companies and all entities eligible for tax, including foreign nationals and firms registered outside India.
Not being able to purchase a motor vehicle, buy immovable property worth over Rs. 10 lakh, or open a bank account, among other activities.
Businesses unable to conduct a large chunk of their financial activities and procurement.
*Please note that these rules may change once Aadhaar and PAN become interchangeable.
The Income Tax Department has prescribed a new format for PAN Cards issued after 1 January 2017. The changes made to the new PAN Card have been listed below:
A Quick Response (QR) code has been printed onto the new PAN Card which will carry details of the card holder. This QR code can be used for verification of data.
New sections for the name of the card holder, the card holder's father's name, and date of birth have been added.
The location of the PAN and the signature of the card holder have been changed.
In order to apply for a PAN card, an application form has to be filled out. There are two types of application forms – Form 49A and Form 49AA. Both forms can be availed through both online and offline platforms.
The forms have to duly filled up and sent to the TIN-Protean e-Gov Technologies Limited's office.
What do the Alphabets and Numbers on your PAN Card Mean?
Your Permanent Account Number is not a series of random numbers and letters. The structure of PAN is actually quite interesting. Here's what each component of PAN means:
First Three Characters: These are a sequence of alphabets from AAA to ZZZ.
Fourth Character: The fourth character signifies the type of taxpayer that you are.
Fifth Character: The fifth character in PAN is the first letter of your surname. So, if a person is named 'Rajesh Khanna', the fifth character of his PAN will be 'K'.
Sixth to Ninth Characters: This is from a sequence of numbers between 0001 and 9999.
Last Characters: This is an alphabet check letter.
Before the concept of PAN was introduced, there was a GIR number assigned to taxpayers. This was basically a manual system and was unique only within a ward or under a particular assessing officer. However, the number was not unique at the country level. Since GIR unique not unique, there could be higher chances of miscalculation and errors, or cases of mistaken identity during tax assessment.
The GIR number was allotted by the Assessing Officer to a tax payer and it included the Assessing Officer's information as well.
In the year 1972, the concept of PAN was rolled out by the Indian government and was made statutory under section 139A of the Income Tax Act, 1961. Initially a voluntary process, PAN was made mandatory for all tax paying individuals in 1976.
The initial PAN number allotments were made manually, and to avoid duplication, each ward/circle received a certain set of numbers. This series was abandoned in the year 1995.
