All taxpaying individuals and entities, Indians and non-resident Indians (NRIs), are allotted a unique identity number, known as the Permanent Account Number (PAN), by the Income Tax Department under the Income Tax Act, 1961. The PAN is a 10-digit alphanumeric number which is imprinted on a laminated plastic card known as the PAN Card. PAN card is an electronic system wherein all the tax related information of individuals & entities are recorded by the Income Tax Department, Govt. of India, under a single Permanent Account Number. No two taxpaying entities can have the same Permanent Account Number. A valid PAN Card serves as an important identity proof for any individual or entity which displays has all the vital details of the PAN holder. It is important to provide this identity proof when one is planning to engage in major financial transactions in India. Also, foreign passport holders and even minors can apply for a PAN card. The PAN Card can be obtained simply by submitting a duly filled application form along with relevant documents. It can be obtained through both an online and offline facility through TIN facilitation centres. Furthermore, the Income Tax Department shall levy a penalty upon taxpayers who do not hold a PAN card or if they hold multiple PAN.
Types of PAN Card
The Income Tax Department issues the PAN card to various taxpayers who are classified into various categories namely Individual, Hindu Undivided Family (HUF), Company, Partnership Firms, NGOs and Foreign Citizens or NRIs. The types of PAN card are explained in detail below:
PAN card for individuals :
A PAN card allows individuals to track and link their financial transactions which help the IT department in calculating the total taxable amount for the individuals, on the basis of this data.
PAN card for companies :
A PAN card for entities looks similar to PAN card for individuals. However, the only exception is a lack of photograph on the physical PAN card. Also, instead of the date of birth which is displayed on PAN card for individuals, the registration date of companies/ organisation is mentioned on the physical card.
PAN for foreign citizens in India :
Foreign passport holders can also apply for a PAN card if they are looking undertake business or make investments in India. However, unlike resident Indians who must fill PAN Application Form 49A, NRIs and foreign citizens must fill and submit PAN application Form 49AA. For verification purpose, foreign citizen/NRI applicants can furnish their passport copy, copy of PIO card, Aadhar card issued by UIDAI, etc.
What is PAN card purpose?
There are several important reasons, as explained below, because of which individuals and entities should own a PAN card:
Filing income tax returns :
The primary reason why one must have a PAN card is the need to file income tax returns. Taxpaying individual and entities are required to furnish their PAN details during the process.
Investing in financial market :
Dealings in financial market like share trading and opening of a Demat account becomes easy with a PAN card.
Investing in real estate market :
For buying or selling of properties such as land or house, it is important to have a PAN card.
Availing banking facility :
Both NRIs and resident Indians can avail banking facility. Having a PAN card particularly benefits NRIs as they can easily open an NRE or NRO account, secure foreign remittance or apply for loans at any bank in India.
Applying for visa or passport :
A PAN card is important when applying for a visa or passport.
Benefits and uses of PAN card
Besides being a mandatory requirement, having a PAN card also has numerous advantages for the PAN card holder, as explained below:
Getting tax deductions :
As per the rules of the Income Tax Department, all taxpayers should have a PAN card. This is important not just for filing the income tax returns, but also for getting tax deductions. On linking the PAN number with one’s bank account, the bank would only deduct 10% TDS instead of a higher rate of 30% when the account holder’s annual interest earnings on savings deposits exceeds Rs. 10,000/-.
Claiming tax refunds :
The I-T return document is required for various purposes like checking one’s credibility during a bank loan. One may be eligible for a refund if his/her TDS exceeds the amount of tax to be paid. A PAN card is required to claim one’s refund.
Buying a car :
Applying for a car loans, or buying or selling a four wheeler can be done easily with a PAN card.
Purchase Foreign currencies :
With a valid PAN card, one can buy foreign currency above Rs. 50,000/- or more.
Making investments:
Hassle-free investment is possible in the financial market, stock market, real estate market, etc. is possible with a PAN card.
Starting a Business :
Companies can obtain Tax Registration Number (TRN) without any hassle using a PAN card.
Getting banking facilities :
Using a PAN card, one can easily avail banking services such as account opening, get bank drafts, pay orders, banker’s cheques, issuance of a credit card and cash deposits above the Rs. 50,000/- limit.
Benefit for government :
Tracking of fraudulent transactions can be done with ease using a PAN card. It also helps in checking cases of tax evasion and ensures transparency in transactions between buyer and seller.
Who is eligible for PAN card?
Although anyone can apply for PAN card, it is a mandatory requirement for taxpaying individuals and entities. That is, all existing assessees, taxpayers or individuals who are eligible for filing their income tax returns, either on behalf of self or others, should get a PAN card. Any individual who is looking to engage in economic or financial transactions must quote the PAN. However, according to Section 160 of Income Tax Act, 1961, non-resident, minor, lunatic, idiot, and court of wards and such other persons can also get a PAN card through a Representative Assessee who will be responsible for making PAN card application. A new PAN card should be applied by any of the above mentioned individuals/ entities who have not applied for a PAN before or do not have the PAN allotted to them. A change or correction in PAN card can be applied in case one needs to make changes/ corrections in existing PAN details.
Structure of PAN card
The structure of the PAN card is explained below:
The initial five and the 10th characters in the PAN are alphabetic while the rest four are numeric in nature.
The initial three out of the first five alphabetic characters range between AAA to ZZZ.
The 5th to 9th characters in the PAN range between 0001 and 9999 whereas the last character is alphabetic check digit.
The fourth character in the PAN represents the status of the PAN Card holder. The status could be any of the below given details:
“P” stands for Individual
“T” stands for Trust
“C” stands for Company
“G” stands for Government Agency
“H” stands for Hindu Undivided Family
“A” stands for Association of person
“B” stands for Body of Individuals
“J” stands for Artificial Juridical Person
“L” stands for Local Authority
“E” stands for Limited Liability Partnership
“F” stands for Partnership Firm, and so on.
Finally, the fifth character denotes the PAN holder’s last name or surname, In case of individual and for non-individuals’ first character of PAN holder’s Name.
How long is the PAN card valid?
Unlike a passport, there is no expiry date for a PAN card. The PAN card issued by the Income Tax department to an individual or entity remains valid for any number of years. However, with time, the PAN card may be prone to wear and tear, and it may be one of the reasons to apply for a new PAN card. By surrendering the old card, individuals and entities can apply for a new PAN card.