Permanent Account Number is a 10 digit alphanumeric number, which is issued as a laminated card, to any “individual” who applies to get it by Income Tax Department, or else to whom the IT department allots this without an application. It enables the Income Tax department to link every transaction of the “individual” with the department. Such transactions include TDS/TCS credits, tax payments, returns of income/ gift/FBT/ wealth, correspondence, specified transactions, and so on.
Permanent Account Number, thus, acts like an identifier for a “person” with tax department. It was first introduced to facilitate linking of different documents, including assessment, tax arrears, tax demand, payment of taxes, etc. relating to assessee, to ease easy retrieval of data and to ease matching of data relating to raising of loans, investment, and other business related activities of taxpayers that are collected through different sources, both external as well as internal, for detecting and widening tax base and combating the tax evasion.
A PAN is something like AFZPK7190K. The first three characters “AFZ” in the given PAN are an alphabetic series ranging from AAA – ZZZ. The fourth character of given PAN is “P.” It represents the PAN holder’s status. “P” means Individual, “F” means Firm, “C” means Company, “H” means HUF, “A” means AOP, “T” means TRUST etc. The fifth character “K” in the given PAN represents the first character of PAN holder’s surname/ last name. The next four characters “7190” in the given PAN stands for sequential number starting from 0001 – 9999. The last character “K” in the given PAN is alphabetic check digit simply.
Why is it Essential to Have PAN?
It’s mandatory to quote your PAN on income return, all correspondence with income tax authority. Since January 1, 2005 it has become mandatory to quote your PAN on challan for any payment due to the Income Tax Department. It’s compulsory also to quote you PAN in all the documents pertaining to following financial transactions:-
(1) Purchase or sale of any steady property valued above five lakh rupees;
(2) Purchase or sale of any vehicle, [the purchase or sale of a vehicle doesn’t include two wheel vehicles, inclusive of detachable side-cars having an additional wheel, attached with the motor vehicle;]
(3) A time deposit, above fifty thousand rupees, having a banking company;
(4) Deposit, above fifty thousand rupees, within an account with the Post Office Saving Bank;
(5) A contract of value above 1 lakh rupees for purchase or sale of securities;
It isn’t compulsory for every individual to get a Permanent Account Number, especially if you don’t file income tax return or don’t engage in any big financial transactions. But, if you do this, it is essential to get PAN card for you. However, having a PAN always improves your credibility in Government’s eyes and other financial institutions, which in turn will make it simple for you to be eligible and get different kinds of mortgages and loans.
Benefits to Income Tax Department
The Permanent Account Number was launched to approximate the total tax produced in the country in order that rate of tax can be properly fixed. The benefit of PAN to IT department is that PAN helps to track your financial dealing and thus fix the rates at which you should be taxed. It’s a useful means to approximate the total tax revenues being generated in country.
The advantages that you can get of having your PAN card are:
- The PAN card has your name, address and photo. Hence it caters as a nationally established proof of your identity.
- Without PAN card, you’ll be taxed at highest possible rate. If you pay your TDS (taxes deducted at source), which can’t be counted without your PAN card and may end up in paying tax twice.
- PAN number is exclusive to all PAN card holders. Your name as well as address may modify; your card might get stolen or lost; but your PAN will stay unchanged. So, the risk of misusage is uncommon.
- As ID proof, this card is dependable, sure, unchanging and nationally recognized.
- With a suitable PAN card, you easily can enter into various monetary transactions. You can get cell phone and landline connection; you also can open your DEMAT account; buy and sell properties and shares and a lot more.
- If you’re a NRI, you easily can buy properties or engage in any business in India using your PAN card even without filing tax return.
- A minor account also can be easily opened and operated with a PAN card of your guardian.
- Not just does the PAN card have all these wonderful advantages, but it is also necessary to carry out most of the usual transactions. The procedure has been simplified highly. So, you must make no delay to get your PAN card.
