PAN Card : Indians, mainly those who pay taxes, are given a 10-digit alphanumeric identification number called a Permanent Account Number (PAN), which consists of both letters and numbers. A person’s PAN number, which acts as the main key for data storage, is used to store all of their tax-related information. No two individuals or tax-paying companies may own the same PAN.
The Income Tax Department also provides a PAN Card to an organization when a PAN is assigned to it. Your PAN is a number, but your PAN Card is a physical card with your name, date of birth (DoB), and photo on it. Copies of this card can be presented as a birth certificate or identity document.
History of PAN Card in India
Prior to the introduction of the PAN Card, each taxpayer was given a GIR number. This particular manual system was exclusive to use under the guidance of a designated evaluating officer. At the national level, the number was not exceptional, though. As a result, there was a higher chance of errors and miscalculations, as well as instances of misidentification while assessing taxes.
The Income Tax Act of 1961’s section 139A made the PAN concept statutory after it was first proposed by the Indian government in 1972. PAN was first voluntary and then made required for all taxpayers in 1976.
PAN Number Format
- The full name of the cardholder.
- The cardholder’s father’s name.
- Pan number digits: it has a 10-digit alphanumeric permanent account number.
- Sign of the cardholder.
- Date of birth.
- A photograph of the cardholder.
- The hologram of the Government of India along with the tag of the Income Tax Department.
Details Included in PAN Card
PAN cards follow Know Your Customer (KYC) regulations and contain information such as identity and proof of age. The PAN card details are as follows:
- 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 cards are used for a variety of tasks, such as opening a bank account and getting a gas connection, as proof of legal identity and photo.
- Banking: To create a bank account and perform other financial transactions related to banking, a PAN card is needed. These days, it is necessary to fight money laundering and fraud. Any daily cash deposits exceeding Rs. 50,000 require the submission of PAN card details. Information from your PAN card must also be submitted for fixed deposits over Rs. 50,000.
- Debit/credit card applications: Applications for debit and credit cards also need PAN information. Your credit score could be impacted by applications that are denied for lack of PAN card information or other reasons.
- Loan Application: PAN card information is required for all types of loan applications.
- Buying/selling property: For any kind of property transaction, sale, or purchase, the buyer and seller’s PAN card data are mandated by law if the value of the immovable property exceeds Rs. 5 lakhs. The PAN card numbers of each owner are needed when there is joint ownership.
- Purchasing jewellery: When purchasing any jewelry or bullion valued at more than Rs. 5 lakhs, PAN info must be provided.
- 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: You will also need to submit PAN card details if your insurance premiums exceed Rs. 50,000 throughout a fiscal year.
- Foreign currency exchange: PAN card information is also necessary when exchanging local currency for foreign currency.
- Most employers need your PAN card details when you apply for a job in order to process payroll and handle taxes. It is also necessary in order to file an ITR.
Benefits of PAN Card
- IT Returns Filing: It is anticipated that all persons and organizations qualified to pay income tax will submit their IT returns. The main reason people and other entities register for a PAN card is because it is required for filing IT returns.
- Identity Proof: A PAN card is a reliable form of identification. In addition to voter cards, Aadhaar cards and PAN cards are recognized as identity verification by all banking institutions and other organizations.
- Tax Deductions: The PAN card is necessary for tax purposes, which is one of the main reasons. The bank will deduct 30% TDS instead of 10% if the entity or individual has not linked his PAN number to his bank account and the annual interest returns on savings deposits exceed Rs. 10,000.
- Claiming Income Tax Refund: A taxpayer’s actual tax liability is frequently greater than the TDS that is withheld from his income. The taxpayer needs to have a PAN connected to his bank account in order to claim any excess tax that was paid.
- Starting a Business: A firm or any other body must have a PAN registered in its name in order to begin business operations.A business requires a Tax Registration Number (TRN), which can only be acquired if the firm has a PAN.
