PAN stands for Permanent Account Number. PAN is a ten-digit unique alphanumeric number issued by the Income Tax Department. PAN is issued in the form of a laminated plastic card (commonly known as PAN card). Given below is an illustrative PAN:
What is the utility of PAN?
PAN enables the department to link all transactions of the assessee with the department. These transactions include tax payments, TDS/TCS credits, returns of income, specified transactions, correspondence and so on. It facilitates easy retrieval of information of assessee and matching of various investments, borrowings and other business activities of assessee.
What are the benefits of obtaining a Permanent Account Number [PAN] and PAN Card?
A Permanent Account Number has been made compulsory for every transaction with the Income-tax Department. It is also mandatory for numerous other financial transactions such as opening of bank accounts, in a bank account, a deposit of cash in a bank account, opening of Demat account, transaction of immovable properties, dealing in securities, etc. A PAN card is a valuable means of photo identification accepted by all Government and non-Government institutions in the country.
How PAN is formed and how it gets its unique identity?
PAN is a ten-digit unique alphanumeric number issued by the Income Tax Department. The formation of PAN is discussed below :
- Out of the first five characters, the first three characters represent the alphabetic series running from AAA to ZZZ. (E.g.ALWPG5809L).
- The fourth character of PAN represents the status of the PAN holder (E.g.ALWPG5809L).
“A” stands for Association of Persons (AoP)
“B” stands for Body of Individuals (BOI)
“C” stands for Company
“F” stands for Firm/Limited Liability Partnership
“G” stands for Government Agency
“H” stands for Hindu Undivided Family (HUF)
“J” stands for Artificial Juridical Person
“L” stands for Local Authority
“P” stands for Individual
“T” stands for Trust
- Fifth character of PAN represents the first character of the PAN holder’s last name/surname in case of an individual. In case of non-individual PAN holders fifth character represents the first character of PAN holder’s name (E.g. ALWPG5809L)
- Next four characters are sequential numbers running from 0001 to 9999 (E.g. ALWPG5809L).
- Last character, i.e., the tenth character is an alphabetic check digit (E.g. ALWPG5809L).
The combination of all the above items gives the PAN its unique identity.
Who has to obtain PAN?
PAN is to be obtained by the following persons:
- Every person if his total income or the total income of any other person in respect of which he is assessable during the previous year exceeds the maximum amount which is not chargeable to tax.
- A charitable trust who is required to furnish return under Section 139(4A)
- Every person who is carrying on any business or profession whose total sale, turnover, or gross receipts are or is likely to exceed five lakh rupees in any previous year
- Every person who intends to enter into specified financial transactions in which quoting of PAN is mandatory
Every non-individual resident person and person associated with them if the financial transaction entered into by such non-individual resident persons during a financial year exceeds Rs. 2,50,000.
Note: Persons associated with non-individual resident persons means the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of the non-individual resident persons or any person competent to act on behalf of such persons.
A person not covered in any of the above can voluntarily apply for PAN.
What are the specified financial transactions in which quoting of PAN is mandatory?
As per rule 114B, the following are the transactions in which quoting of PAN is mandatory by every person except the Central Government, the State Governments and the Consular Offices:
- Sale or purchase of a motor vehicle or vehicle other than two wheeled vehicles.
- Opening an account [other than a time-deposit referred at point No. 12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank
- Making an application for issue of a credit or debit card.
- Opening of a demat account with a depository, participant, custodian of securities or any other person with SEBI
- Payment in cash of an amount exceeding Rs. 50,000 to a hotel or restaurant against bill at any one time.
- Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
- Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its units
- Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring debentures or bonds issued by it.
- Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds issued by it.
- Deposit with a banking company or a co-operative bank:-
- Cash exceeding Rs. 50,000 during any one day; or
- Cash deposit of aggregating to more than Rs. 2,50,000 during the period 09th November, 2016 to 30th December, 2016
- Payment in cash for an amount exceeding Rs. 50,000 during any one day for purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank.
- A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with –
- a banking company or a co-operative bank
- a Post Office;
- a Nidhi referred to in section 406 of the Companies Act, 2013 or
- a non-banking financial company
- Payment in cash or by way of a bank draft or pay order or banker’s cheque of an amount aggregating to more than Rs. 50,000 in a financial year. for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 to a banking company or a co-operative bank or to any other company or institution.
- Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer
- A contract for sale or purchase of securities (other than shares) for amount exceeding Rs. 1 lakh per transaction
- Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange for amount exceeding Rs. 1 lakh per transaction.
- Sale or purchase of any immovable property for an amount exceeding Rs. 10 lakh or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
- Sale or purchase of goods or services of any nature other than those specified above for an amount exceeding Rs. 2 lakh per transaction.
- Minor person can quote PAN of his father or mother or guardian provided he does not have any income chargeable to income-tax.
- Any person, who does not have PAN and enters into any of above transaction, can make a declaration in Form No.60.
- Quoting of PAN is not required by a non-resident in a transaction referred at point No. 3 or 5 or 6 or 9 or 11 or 13 or 18.
How to apply for PAN?
- PAN application can be filled up in the following forms –
- Form 49A (for Indian Citizens)
- Form 49AA (for Foreign Citizens)PAN application can be made either online through NSDL website www.tin-nsdl.com (Click here to apply for PAN online) or UTIITSL website (Click here to apply through UTIITSL) or through any of the NSDL TIN-Facilitation Centres/ PAN Centres (Click here to select the nearest TIN – Facilitation Centers/ PAN centres where PAN application may be submitted).While submitting PAN application form, applicant will have to indicate whether physical PAN card or E-PAN card is required.If applicant opts for physical PAN Card, then physical PAN card will be printed & dispatched at communication address.If the physical PAN Card is not required. In such cases, email ID will be mandatory & e-PAN Card in PDF format will be sent to the PAN applicant at the email ID mentioned in PAN application form. Physical PAN Card will not be dispatched in such cases.
In case of an applicant, being a company which has not been registered under the Companies Act, 2013, the application for allotment of a Permanent Account Number is to be made in Form No. SPICE-INC-32 specified under sub-section (1) of section 7 of the said Act for incorporation of the company. (Application for TAN is also to be made through SPICE-INC-32)Note: w.e.f. 01-07-2017, every person who is eligible to obtain Aadhaar number shall quote either Aadhaar number or enrolment ID of Aadhaar application form in the PAN application form.