PAN or Permanent Account Number is a unique identification proof or a unique identity number allotted to an Indian citizen by the Indian Tax Department, which is generally represented by a ten digit number. This unique ten digit identification number may be alphanumeric in nature and is issued under the supervision of the Central Board for Direct Tax. Knowing your PAN as a citizen is a necessary step in performing many crucial activities. Let us understand what is the significance of the PAN and why it is necessary to own a PAN card.
The Magic within the 10 Digits
The unique ten digit identifier incorporated in a PAN card has specific significance for each digit. The structure of a typical Indian PAN card follows the following pattern:
The first 5 characters are letters, the next 4 are numerals and the last character is once again a letter. The first three characters represent the alphabetic running series from AAA to ZZZ. The fourth character helps in identifying the type of holder of the card. Each unique holder is identified as below:
The letter “A” is used to represent an Association of Persons (AOP)
The letter “B” is used to represent a Body of Individuals (BOI)
The letter “C” is used to represent a Company
The letter “F” represents a Firm
The letter “G” represents the Government
The letter “H” represents Hindu Undivided Family (HUF)
The letter “L” represents a Local Authority
The letter “P” represents an individual
The letter “T” represents a Trust (AOP)
The 5th character in the 10 digit number represents the first letter of the surname of the person concerned; or, the first letter of the name of the entity, trust, society or organization he represents.
The next four numerals are the sequential numbers that run from 0001 to 9999; and the last character of the PAN is a unique alphabetic check digit.
Why is it Compulsory to have a PAN?
The Indian Income Tax Authorities have made is mandatory for every citizen of the Indian Republic to quote the PAN during Income Tax Returns since 1st January, 2005. It is a compulsory affair to quote PAN number for transactions involving amounts over Rs.25,000 or on challans prepared for making any payments due to Income Tax Department. According to the existing law, a citizen of India has to quote his PAN if he indulges in a sale or purchase of any immovable property worth Rs 5 Lakh or more; indulges in a sale or purchase of a motor vehicle; prepares bank drafts or pay orders whose aggregate amount it over Rs. 50, 000; opens a new bank account.
Advantages of PAN
There are several benefits of owning a PAN card. One major advantage is that it may be used as a valid Identity proof. A copy of a PAN Card comes with a photograph and a few more details about an individual and has been declared by the Indian Administration as a valid identity proof. Owning a PAN signifies that a person is a concerned citizen and he is committed to his duties to his country.
Who Needs to have a PAN?
A PAN should be owned by
i) Any Indian citizen who is an existing taxpayer or an individual who is required to furnish an income tax return.
ii) Any person who is involved in financial transactions or intends to involve in transactions that needs quoting PAN as mandatory.
How to Apply for a PAN?
An application for PAN may be downloaded from the internet or may be collected from any Income Tax office or a branch. The Form 49A is considered as a valid application format for a PAN and may be used in original or a photocopy format. Generally, a person applying for a PAN has to submit a few mandatory identification documents for processing the request. These documents may include a copy of the high school leaving certificate or a degree certificate; a copy of the ration card, water/electricity bill or a voter identity card etc.
Provisions in the Section 15 G/ 15 H
Usually banks ask depositors to submit forms 15G and 15H regularly to avoid any discrepancies that may arise out of banking transactions in their accounts. For instance, no TDS is deducted by any bank on the amount of interest earned in savings bank accounts and recurring bank deposits. These two forms act as self-declaration applications for nil deduction or lower deduction of TDS on interest of a particular bank account. According to the RBI guidelines, a bank also needs to submit an acknowledgement letter or a receipt to a person who submits a 15G or 15H form.
