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The PAN, or Permanent Account Number, is a unique alphanumeric number with 10 digits. The Department of Income-Tax issues PAN according to the Income Tax Act & Rules. PAN is an electronic system through which all tax-related information is recorded against a single PAN number for a person / company. This acts as the primary key to information storage, and is shared across the country. No two tax paying entities can therefore have the same PAN. Financial institutions and agencies require PAN, too. PAN Card is issued to individuals, businesses, Indians who are not resident or whoever pays tax in India.
PAN allows the department to connect all "individual" transactions of a person within the department. These transactions include tax payments, TDS / TCS credits, revenue returns, transactions listed, correspondence etc. Therefore, PAN acts with the tax department as an identifier for the "individual."
PAN has been developed to facilitate the linking of various records, including tax payment, assessment, tax demand, tax arrears etc. relating to an assessed individual, to facilitate the easy retrieval of information and to facilitate the matching of information relating to investment, the raising of loans and other business activities by taxpayers collected from various sources, both internal and external.
- A typical PAN is of this format ABCPS1234K
- First three characters i.e. "ABC" in the above PAN are alphabetic series running from AAA to ZZZ
- Fourth character of PAN i.e. "P" in the above PAN represents the status of the PAN holder. "P" stands for Individual, "F" stands for Firm, "C" stands for Company, "H" stands for HUF, "A" stands for AOP, "T" stands for TRUST etc.
- Fifth character i.e. "S" in the above PAN represents the first character of the PAN holder's last name/surname.
- Next four characters i.e. "1234" in the above PAN are sequential numbers running from 0001 to 9999.
- Last character i.e. "K" in the above PAN is an alphabetic check digit.
What are the uses of PAN for Income Tax?
PAN is mandatory for all tax-paying citizens. It has to be mentioned on your income tax returns. Here are some of the applications of the PAN number:
- For payment of direct taxes
- To file income tax returns
- To avoid deduction of tax at higher rate than due
To enter into a specific transaction such as:
- Sale or purchase of immovable property valued at Rs 5 lakh or more
- Sale or purchase of a vehicle other than a two wheeler
- Payment to hotels or restaurants an amount exceeding Rs 25,000 at any one time
- Payment in cash an amount exceeding Rs 25,000 in connection with travel to any foreign country
- Payment of an amount of Rs 50,000 or more to the Reserve Bank of India for acquiring bonds
- Payment of an amount of Rs 50,000 or more to a company or an institution for acquiring bonds or debentures
- Payment of an amount of Rs 50,000 or more to a company for acquiring shares
- Any mutual fund purchase
- Deposit exceeding Rs 50,000 with any single banking institution in 24 hours.
- Payment exceeding Rs 5 lakh for purchase of bullion and jewellery
By mentioning your PAN number on these transactions, the government is able to keep track of the financial transactions you have carried out in a year and levy corresponding income tax on a citizen.
PAN & TDS
TDS is Tax Deducted at Source. It is the tax deducted from incomes such as rent, salary, commission, professional fees, interest, etc. It is deducted by the person making the payment before it is credited to the beneficiary. This TDS is then deposited to the Government by the deductor against the deductee’s PAN number.
Your TDS is linked to your PAN number. This allows you and the government to conveniently track the tax that you have paid to the income tax department. You can check your TDS statement using Form 26AS.
There are two ways to check your TDS status; PAN Card is an important input criterion to check your TDS status online. You can either check the status through the TDSCPC Portal or through the Income Tax e-Filing Portal. Both these portals require your PAN Number.
Aadhaar based PAN
Instant PAN allotment service based on Aadhaar has been introduced to assign PAN in near-real time. You are required to quote a valid Aadhaar number issued by India's Unique Identification Authority (UIDAI) and is not linked to any PAN. The e-KYC data from the Aadhaar number will be shared with India's Unique Identification Authority (UIDAI). You will be allotted a PAN after proper processing of e KYC data in the Income-Tax database.
- Aadhaar based PAN is easy to apply and avail
- Simple paperless process
- PAN is allotted within 10 minutes
- Valued similarly to a physical PAN Card
- All you need is a valid Aadhaar number and the mobile number linked to it
- Enables tax assessees to file tax online without any hassle
Who all are eligible to get a PAN in India?
PAN Card is issued to individuals, companies, non-resident Indians or anyone who pays taxes in India.
- Individual
- HUF-Hindu undivided family
- Company
- Firms/Partnerships
- Trusts
- Society
- Foreigners
How do you apply for a PAN Card?
In order to facilitate easy application and issuance of PAN Card, the Government has PAN processing through the NSDL & UTIITSL. These two organisations accept physical as well as online applications for issuance of new and duplicate PAN cards to eligible applicants.
- Use 'Form 49A' or 'Form 49AA' as applicable to you.
- You can find the location of PAN card offices in any city from the websites of the Income Tax Department or National Securities Depository Limited (NSDL).
- You can also apply online by visiting the official PAN – NSDL/UTIITSL website
- Fill the form with your details
- You will need copies of proof of Identity and address. Submit the required documents
- Pay the processing fee. Payment can be made using cash, cheque or demand draft. If you are applying online, the processing fee can be paid via net banking, credit card or debit card.
- PAN will be dispatched within 15 days. Track the status of your application online on the NSDL or UTIITSL website, wherever you applied.