PAN Card - Meaning, Importance, Uses & Benefits

A Permanent Account Number (PAN) is a 10-digit alphanumeric code assigned to Indian taxpayers. This combination of characters and numbers is the most crucial key to storing and tracking all tax-related details. Each PAN is unique; hence, no two persons or tax-paying organisations have the same number, making it a distinct identifier in the Indian tax system.

Let's understand what is meant by PAN Card.

History of PAN Card in India

Indian taxpayers were provided with a GIR number before the PAN Card was launched. It was a manual procedure, and the number was assigned depending on the particular assessing officer handling the case. The most significant drawback was that the number was not unique.

The concept of a PAN was first proposed by the Indian government in 1972, and the decision was implemented as a law through section 139a of the Income Tax Act, 1961. Having a PAN was optional for taxpayers at the time of its first introduction. This turned into a compulsory requirement for all tax-liable persons in 1976.

What is a PAN Card?

A PAN Card is a crucial document issued by the Income Tax Department. It contains a 10-character alphanumeric Permanent Account Number (PAN). It is a key identity document for the tax department, linking all financial and tax-related details of the holder.

A PAN Card can be either physical or virtual, and both types contain the PAN and other essential details of the individual. The income tax department has implemented a new design since 1 January 2017, which enables the quick response (QR) code to be printed on each Card. The QR code holds the information of the Cardholder and is used for the authentication process.

Importance of a PAN Card in India

In India, a PAN Card is a crucial document that every person or organisation should possess. Its necessity has risen as the primary source of information about a taxpayer and is also being used for other purposes.

Every PAN Card has a unique ten-digit alphanumeric number, serving as a financial identifier. Speaking of the tax system, the PAN helps accurately record every activity related to taxes, making it easier to file income tax returns.

A PAN is also a must if one is willing to open a savings bank account. The RBI and other financial institutions are using the PAN to identify high-value transactions that are targets of money laundering activities.

Uses of PAN Card

A PAN Card is a must-have document when paying direct taxes. Taxpayers must also submit their PAN details when filing their income tax returns. Some of the major events where the information on the PAN Card is necessary are as follows:

• The buying or selling of landed property worth ₹5 lakhs or more.
• Buying or selling of motor vehicles, excluding two-wheelers.
• Transactions with hotels or restaurants over ₹25,000.
• Foreign travel expenses for more than ₹25,000.
• Bank deposits exceeding ₹50,000 in a single transaction.
• Investment in government bonds of ₹50,000 or more.
• Purchasing of shares worth ₹50,000 or more.
• Purchasing of insurance policies worth ₹50,000 or more.
• Mutual fund investments.
• Transactions exceeding ₹5 lakhs for the purchase of bullion or jewellery.
• Sending money to a location outside India.

Benefits of PAN Card

Now that you have understood the PAN Card meaning, here are its benefits:

• Income tax returns filing: Any individual or organisation liable to pay income taxes in India is required to file returns, and to do so, possession of a PAN Card is obligatory.
• Authentic identity proof: Besides Aadhaar and voter ID, the PAN Card is also widely accepted by banks and other institutions as a valid form of identification.
• Compliance in taxation: Linking a PAN Card with a bank account is a crucial aspect for taxation compliance.
• Tax refund claims: In cases where the TDS deducted exceeds the tax liability, taxpayers can claim a tax refund only if their PAN is correctly linked to their bank account.
• Business requirements: It is mandatory for businesses willing to start operations that a PAN be registered in the name of the entity. The tax registration number (TRN), a prerequisite for conducting business, can only be acquired if the entity has an active PAN.

Different types of PAN Cards

PAN Cards are offered in different categories, each characterised by a particular function:

Personal PAN Card

This is the one designed for individual taxpayers. It is used for income tax filing, opening a bank account, and carrying out investment transactions, among other purposes.

Company PAN Card

This is the type of PAN Card assigned to companies registered under the Companies Act of India. It is utilised in a company’s financial transactions, payment of taxes, and statutory filings.

Business PAN Card

The Card was created for banking, tax returns, and regulatory compliance for partnerships, trusts, and NGOs. It is a primary means of financial transactions and statutory compliance through which transparency is ensured.

Documents required for PAN application

Documents to be furnished along with the PAN application depend on which category the applicant is in:

Individual applicant:

• Evidence of identity includes Aadhaar Card, passport, voter ID card, driving licence, ration card, arms licence, pensioner card, photo identification issued by the government, or a central government health scheme card.
• Address proof includes documents like Aadhaar Card, passport, voter ID card, driving licence, bank or post office passbook, recent utility bills, property tax assessment order, domicile certificate, property registration documents, or an employer's certificate.
• Proof of date of birth includes documents such as an Aadhaar Card, passport, voter ID card, driving licence, matriculation certificate or mark sheet, birth certificate, government-issued photo identification, domicile certificate, or marriage certificate.

Hindu Undivided Family (HUF)

• An affidavit signed by the head of the HUF, along with a copy of the ID and the address.

Company registered in India

• Registration certificate issued by the registrar of companies.

Limited liability partnership (LLP)

• Registration certificate issued by the registrar of companies.

Partnership firms

• Either a certificate of registration issued by the registrar of firms or a duplicate of the partnership deed.

Trust

• The trust deed or the certificate of registration number issued by the charity commissioner.

AOP, BOI, local authority, or artificial juridical person

• The agreement or certificate of registration number issued by the Charity Commissioner, Registrar of Cooperative Societies, or any other competent authority.

Foreigners

• Proof of identity: a passport, PIO/OCI Card, citizenship ID, or taxpayer identification number, which must be attested by an "apostille" or the Indian embassy/consulate.
• Proof of address includes documents such as a passport, PIO/OCI Card, a bank statement, certificate of residence in India, registration from the foreigner's registration office, visa copy, or an appointment letter from an Indian company.

Who can apply for a PAN Card?

Entities that need to have a PAN Card are:

• Individuals whose income is more than the specified basic exemption limit under the income tax regime.
• Persons on whose behalf income chargeable to income tax is received, e.g., income that becomes the property of a minor.
• Those who are engaged in a profession or business with income, turnover, or sales exceeding ₹5 lakhs.
• Persons who are registered either under the state or union territory general sales tax enactments or under the Central Sales Tax Act.
• Any individual performing financial transactions where PAN disclosure is mandatory.
• Charitable trusts that are required to file returns under section 139(4a) of the Income Tax Act.
• Importers/exporters are required to have an import/export code to carry out these activities.
• Persons who are required to pay excise duty.
• People who are the recipients of payments under deduction of tax at source (TDS).
• Individuals or their representatives on whom the liability of payment of service tax is cast.
• Individuals who are issuing invoices under Section 57AE.

How are PAN numbers allocated?

PAN numbers are structured in a way that allows each individual and entity to be uniquely identified, a feature necessary for effective financial regulation.

• The first three characters go from AAA to ZZZ in alphabetical order.
• The fourth character defines the type of the account holder - 'p' for an individual, 'c' for a company, etc.
• The fifth character is the first letter of the person's last name or the company's name.
• After that, four numbers can go from 0001 to 9999; these numbers are sequential.
• The last character is an alphabetical check digit used for validating the PAN.

How to download a PAN Card online?

If you want to apply for a PAN Card online, the procedure is quite simple:

• The initial step is to visit the electronic PAN Card website.
• To authenticate and identify your entry securely, you will need to provide your date of birth, acknowledgement number, Aadhaar number, and PAN.
• Once these are verified, you can download your e-PAN for free and use it immediately.
• The process of obtaining a PAN for a company is almost the same, only that there are a few differences.

There are, however, specific systems and laws that govern the distribution of PAN numbers.

Conclusion

The PAN (Permanent Account Number) Card is not merely a typical tax form, but an indispensable part of the financial identity of Indians and all types of organisations. Whether the person is opening a bank account, launching a business, or conducting a significant financial transaction, the PAN Card is always required at every step.

It is fundamentally a vehicle for providing transparency and accountability in the formal financial system, as well as for meeting regulatory requirements. So, understand what is meant by PAN Card and apply for one as early as possible.

Also Read: 6 things to consider before opening a Savings Account

Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.