What you Know about your PAN Card?

PAN is a ten-digit unique alphanumeric number issued by the Income Tax Department. PAN stands for Permanent Account Number. A PAN card is a valuable means of photo identification accepted by all Government and non-Government institutions in the country. It is mandatory to have a PAN for conducting financial transactions such as filing for Income Tax Return, buying mutual funds, applying for a loan, etc. However, the fundamental aspect of issuing PAN cards to every citizen in India is to keep track and maintain a record of their financial transactions for taxation purposes.

Do You Know How to read PAN?

Let’s see how to read and understand the PAN and for this purpose, we will take an imaginary PAN that is “UVWXY1234Z”.

  • Out of the first five characters, the first three characters represent the alphabetic series running from AAA to ZZZ.
  • The fourth character of the PAN represents the status of the PAN holder. Which may depend upon categories of person:
    • “A” = stands for Association of Persons (AOP)
    • “B” = stands for Body of Individuals (BOI)
    • “C” = stands for Company
    • “F” = stands for Firm/LLP
    • “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
  • The fifth character of PAN represents the first character of the PAN holder’s last name/surname in the case of an individual.
  • The next four characters are sequential numbers running from 0001 to 9999.
  • The last character, i.e., the tenth character is an alphabetic check digit.

Who has to obtain PAN?

  • Every person if his total income in respect of which he is assessable during the year exceeds the maximum amount which is not chargeable to tax. ( i.e., currently more than 2,50,000 ).
  • Every person who is carrying on any business or profession whose total sale, turnover, or gross receipts are or is likely to exceed Rs. 5,00,000 in any previous year.
  •  A charitable trust is required to furnish a return under Section 139(4A).
  • Every person who intends to enter into specified financial transactions in which quoting of PAN is mandatory. 
  • Every non-individual resident persons and persons associated with them shall apply for PAN in certain cases.
  • A person who is not falling above can apply on a voluntary basis.

Can a minor have a PAN Card?

As above mention eligibility, it is clear that it does not specify any age limit. It is a common misconception among people that PAN can only be allotted once a person turns 18 years of age. However, this is a myth as Minors can also apply for PAN Card and the Income Tax department also allots PAN Card to Minors without any hassles. Minors cannot apply for PAN card themselves directly; therefore the minors’ guardians, parents or representative assessees have to apply on their behalf.

General Benefits of PAN card:

  • – PAN card is required to open a bank account
  • – PAN card is required for Phone connection.
  • – PAN card is required for a new Gas connection.
  • – Lesser deduction of TDS.
  • – PAN card may help in the deduction of fraudulent transactions. It also reduces tax evasion and provides transparency in transactions between buyer and seller.

Is quoting of PAN is mandatory?

The main objective of a PAN is to track and prevent tax evasion. If you do not have a PAN, the Income Tax Department may consider you to be concealing important information related to your financial transactions from them. Following are the transactions in which quoting of PAN is mandatory by every person :

1) Sale or purchase of a motor vehicle or vehicle other than two-wheeled vehicles.

2) Opening an account with a banking company or a co-operative bank 

3) Making an application for the issue of a credit or debit card.

4) Opening of a Demat account with a depository, participant, custodian of securities or any other person with SEBI 

5) Payment in cash of an amount exceeding Rs. 50,000 to a hotel or restaurant against the bill at any one time. 

6) Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country or payment for the purchase of any foreign currency at any one time. 

7) Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for the purchase of its units.

8) Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring debentures or bonds issued by it. 

9) Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds issued by it. 

10) Deposits of cash exceeding Rs. 50,000 during any one day with a banking company or a cooperative bank. 

11) Payment in cash for an amount exceeding Rs. 50,000 during any one day for the purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank. 

12) A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with –

 (i) a banking company or a co-operative bank

 (ii) a Post Office;

 (iii) a Nidhi  or

 (iv) a non-banking financial company 

13) 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.

14) Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer 

15) A contract for sale or purchase of securities (other than shares) for an amount exceeding Rs. 1 lakh per transaction 

16) Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange for an amount exceeding Rs. 1 lakh per transaction.

17) 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. 

18) Sale or purchase of goods or services of any nature other than those specified above for an amount exceeding Rs. 2 lakh per transaction.

Summary of above Transaction where quoting of PAN is mandatory:

  • For all Value of Transaction related to purchasing of Four wheelers or more, on Opening of Bank Accounts, Demat Accounts and applying to the credit card.
  • On purchasing of securities other than share or purchase of unlisted share where per transaction value is more than 1,00,000.
  • Sale or purchase of Goods / and service, if the value is more than 2,00,000 per transaction.
  • Sale or purchase of the immovable property if the value is more than 10,00,000 and
  • For other than the above cases if the value is more than 50,000.

The exception to above:

  1. A minor person can quote PAN of his father or mother or guardian provided he does not have any income chargeable to income-tax. 
  2. Any person, who does not have a PAN and enters into any of the above transaction, can make a declaration in Form No.60. 
  3. 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. 
  4. Any person who has an account (other than a time deposit referred at point no. 12 and a Basic Saving Bank Deposit Account) maintained with a banking company or a co-operative bank. He will be required to furnish his PAN or Form No.60 on or before 30-06-2017 if he has not quoted his PAN or furnished Form No. 60 at the time of opening of such account or subsequently.

How many PAN card you can hold?

 A person cannot hold more than one PAN. A penalty of Rs. 10,000/- is liable to be imposed under section 272B of the Income-tax Act, 1961 for having more than one PAN. If a person has been allotted more than one PAN then he should immediately surrender the additional PAN card(s).

What if the PAN card is lost and PAN is forgotten?

In such a case, one can know his PAN by using the facility of “Know Your PAN” provided by the Income Tax Department. This facility can be availed of from the website of Income Tax Department –www.incometaxindia.gov.in A person can know his PAN online by providing his core details like Name, Father’s Name and Date of Birth. After knowing the PAN you can apply for a duplicate PAN card by submitting the “Request for New PAN Card Or/ And Changes Or Correction in PAN Data”.

PAN and AADHAR are interchangeable for Income -tax purpose:

where a person entering into high-value transactions, such as the purchase of foreign currency or huge withdrawal from the banks, does not possess a PAN. It has been provided that every person who is required to furnish or intimate or quote his PAN under the Income-tax Act, and who,- 

  • has not been allotted a PAN but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar in lieu of PAN. Further, the Income-tax department shall allot PAN to such a person in the prescribed manner.
  • has been allotted a PAN, and who has linked his Aadhaar number with PAN as per section 139AA, may furnish his Aadhaar number in lieu of a PAN for all the transactions where quoting of PAN is mandatory as per Income-tax Act.

Penalty for not complying with provisions relating to PAN

 Section 272B provides for penalty in case of default in complying with the provisions relating to PAN, i.e., failure to obtain, quote, or authenticate PAN. The amount of penalty shall be Rs. 10000 for each default. As the Finance, (No. 2) Act, 2019 as provided for interchangeability of Aadhar with PAN, Consequential amendments have been made in the penal provisions of Section 272B so as to levy a penalty of Rs. 10,000 for each default in the following cases: 

a) If the assessee fails to quote or intimate his PAN or Aadhaar or quotes or intimates invalid PAN or Aadhaar. 

b) If the assessee fails to quote or authenticate his PAN or Aadhaar in specified transactions. 

c) If the receiver (i.e., banks, financial institution, etc.) of documents in respect of specified transactions fails to ensure that the PAN or Aadhaar are duly quoted and authenticated.

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