Individuals and entities in India who are filing their income tax returns or engage in certain types of financial transactions are required to quote a very specific string of alphanumeric characters that is linked to the country’s Income Tax Department. This 10-character string is known as the Permanent Account Number or more colloquially known as PAN. And the card that contains this information is called the PAN Card. This is what you will use whenever you engage in business or financial transactions such as opening a new bank account or even registering a new business. Everyone is mandated by law to have their PAN. As such it is imperative that you obtain a PAN Card that you can call your own.
Meaning of PAN Card
As we have already mentioned, PAN refers to Permanent Account Number and that the PAN Card is the physical representation of this all-important piece of taxation and financial information. The PAN is what you will use whenever filing returns with the Income Tax Department or when businesses, government offices, and financial institutions require you to quote your PAN. It can also be used as proof of one’s identification.
The PAN of an individual links a variety of documents which would be very impossible and tedious to track and manage manually. As such, the PAN effectively digitalizes and systematizes the organization, presentation, and management of an individual taxpayer’s digital financial information as well as the correlation of such information with other activities that may involve business and investment. The PAN Card also holds invaluable pieces of information about the cardholder’s identity, making it an acceptable form of identity proof. This is especially true among financial institutions that are quite strict when it comes to the observance of their Know Your Customer guidelines.
Every taxpayer in India, both individuals and entities, is expected to have a PAN as per Section 139-A of the country’s 1961 Income Tax Act. Non-compliance with the law will automatically result in a fine of Rs 10,000/-.
Who Should Have a PAN Card?
The Permanent Account Number is for everyone in the Republic of India whether individual or entity, local or foreign. As long as the individual or entity is expected to file a return with the Income Tax Department in any given year, quoting the Permanent Account Number will be required. The PAN is also expected from individuals and entities that will generate sales or gross receipts or turnovers amounting to a minimum of Rs 5 Lakhs. All individuals and entities entering into a financial, business, or economic transaction will also need to quote their respective Permanent Account Numbers.
What Do the Figures in the Card Mean?
There are 10 alpha-numeric characters in the PAN Card. These are as follows.
- First 3 characters – These are a combination of any of the letters of the English alphabet and can include any combination from AAA to ZZZ.
- 4th character – This is a letter that corresponds to the cardholder’s classification or designation as a taxpayer according to the Indian 1961 Income Tax Act. These include association of persons (A), body of individuals (B), companies (C), firms (F), government offices (G), undivided Hindu families (H), local Indian authorities (L), artificial judicial persons (J), and association of persons for a trust (T). Of course, individual taxpayers are given the letter P designation for ‘personal’. As you notice there are only 10 possible letters in the 4th character of the PAN.
- 5th character – This is another letter of the alphabet that represents the first letter of the cardholder’s surname. If the cardholder is an entity, then the first letter of the officially registered name is depicted on the 5th PAN character.
- 6th to 9th characters – These are a combination of numbers from 0 to 9 and can start with 0001 to 9999. These are randomly generated by a system computer.
- 10th character – For many individuals, the 10th number is very difficult to decipher since it takes into consideration the first 9 characters in the PAN string and runs them into a certain formula to come up with a unique letter identifier. This also serves as one of the ways to provide a failsafe on the system.
What Other Data Can Be Found in the PAN Card?
The PAN Card also contains other information such as the following.
- Name of the cardholder
- Name of the cardholder’s father
- Date of birth
- Valid photograph
These pieces of information make the PAN Card an excellent evidentiary document to establish one’s identity. It is also excellent for matching the information on the card with various other documents especially those related to financial, economic, or business transactions.
Why Everyone Needs a PAN Card
Indian nationals and entities together with foreign nationals and entities that are doing business in the Republic of India are mandated by law to obtain their respective Permanent Account Numbers. This helps facilitate the linking of all finance- and economic-related activities to the Income Tax Department’s central data processing system. While the system is designed specifically to prevent tax evasion and fraud, it actually works to make the application of various economic activities more efficient. This allows taxpayers to enjoy the products and services that they paid for a lot sooner.
Generally, the Permanent Account Number can be used in the following situations:
Filing of income tax returns
Taxpayers who fail to file their returns or who fail to quote their Permanent Account Numbers are subject to a 30% flat rate against their income. It should be made clear that the PAN is designed specifically to counter tax fraud and tax evasion.
Opening a Bank Account
Banks in India have very strict policies when it comes to the enforcement of their Know Your Customer initiatives. Anyone who wishes to open an account with a banking institution in India is required to quote their Permanent Account Number. Many bank organizations also require the presentation of the actual physical card as a means of validating and confirming the identity of the bank account applicant and the various pieces of information written in the bank account application form. Any discrepancy in the data can be enough reason for declining the opening of an account.
Registering a business
Entities that wish to engage in a legitimate business in India are mandated by law to apply for their respective PANs as one of the essential requirements to having their business duly registered and certified by the government.
Engaging in financial, investment, or business transactions
There are certain economic transactions that require the quoting of a PAN. For instance, selling or buying an immovable property worth at least Rs 5 Lakhs or even a motor vehicle, with the exception of two-wheelers, requires the quoting of PAN. Overseas travel cash expenses exceeding Rs 25,000/-, purchasing mutual funds, shares, and bonds worth more than Rs 50,000/-, and even depositing in excess of Rs 50,000/- in a bank will also require the quoting of PAN. The Income Tax Department has a complete list of transactions requiring PAN.
Availing of utility services
Many Indian utility firms require the showing of the PAN Card from first-time service applicants as a means of establishing their identity. This can include water and electric utility companies as well as internet service providers and mobile phone companies. However, if the company doesn’t specifically ask for your PAN Card, other identification cards can be presented.
How Can You Obtain Your PAN Card?
Getting a PAN Card used to be very tedious and taxing and one had to line up in long queues in processing centers. With the introduction of an online system, people and entities can now obtain their own PAN with just a few clicks of a button on the website of a reputable and accredited online PAN application service provider.
One only needs to supply the required information on the appropriate PAN application form, submit the required documents by choosing the best method of document submission, and then paying for the appropriate fees. Once the payment has been acknowledged, the system will generate a 15-digit acknowledgement number which the applicant can use to make follow-ups as well as a temporary proof of PAN application.
Giving only the correct and valid information in the application form is a must since the PAN Card can also be linked with other identity cards in India such as the Aadhaar Card. The information on complete residence address is also critical since this is where the PAN Card will be physically delivered to. If the address is incorrect, you won’t be able to receive your PAN Card.
Getting a PAN Card Today
The Permanent Account Number is a crucial piece of information about the taxpaying status of an individual or entity in India. It facilitates the completion of economic-related activities while also serving as valid proof of one’s identity. Getting your PAN Card today has been made super-easy. Log onto our website, fill out the form, submit the form together with other documents requested, and we’ll have it processed immediately. You’ll have your PAN Card in no time at all. You can apply for a new PAN card here or also use the services of pan-card.org.in to process your application.