ALL ABOUT PAN

• What is PAN?

• A permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any "person" who generally applies for it. PAN enables the department to link all transactions of the "person" with the department. These transactions include tax payments, TDS/TCS credits, returns of income, specified transactions, correspondence, and so on. PAN, thus, acts as an identifier for the "person" with the tax department.

What does it look like?

A typical PAN is a ten-digit alphanumeric number. e.g., AFZPK7190K.

The first three characters i.e. "AFZ" in the above PAN are alphabetic series running from AAA to ZZZ.

The fourth character of PAN i.e. "P" in the above PAN represents the status of the PAN holder.

"P" stands for Individual, "F" stands for Firm, "C" stands for Company, "H" stands for HUF, "A" stands for AOP, "T" stands for TRUST etc.

The Fifth character i.e. "K" in the above PAN represents the first character of the PAN holder's last name/surname. Following four characters i.e. "7190" in the above PAN are sequential numbers running from 0001 to 9999.

The Last character i.e. "K" in the above PAN is an alphabetic check digit.

Why is it necessary to have a PAN?

A Permanent Account Number has been made compulsory for every transaction with the Income-tax Department. It is also mandatory for numerous other financial transactions such as opening of bank accounts, in bank account, deposit of cash in bank account, opening of Demat account, transaction of immovable properties, dealing in securities, etc. A PAN card is a valuable means of photo identification accepted by all Government and non-Government institutions in the country.​

​​As per rule 114B​​, following are the transactions in which quoting of PAN is mandatory by every person except the Central Government, the State Governments and the Consular Offices:

1. Sale or purchase of a motor vehicle or vehicle other than two-wheeled vehicles.​ ​
2. Opening an account [other than a time-deposit referred at point No. 12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank​.
3. Making an application for 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 ag​ainst 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 purchase of any foreign currency at any one time.
7. Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its unit.s
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. Deposit with a banking company or a co-operative bank:- ​• Cash exceeding Rs. 50,000 during any one day; or • Cash deposit aggregating to more than Rs. 2,50,000 during the period 09th November, 2016 to 30th December, 2016.
11. Payment in cash for an amount exceeding Rs. 50,000 during any one day for 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 - ​a banking company or a co-operative bank a Post Office; a Nidhi referred to in section 406 of the Companies Act, 2013 or 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, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 to a banking company or a co-operative bank or to any other company or institution.
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 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 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.

What is the Validity of a PAN?

​PAN obtained once is valid for life-time of the PAN-holder throughout India. It is not affected by change of address or change of Assessing Officer etc. However, any change in the PAN database (i.e. details provided at the time of obtaining PAN) should be intimated to the Income Tax Department by furnishing the details in the form for “Request For New PAN Card Or/ And Changes or Correction in PAN Data”.​

Can I have two or more PANs?

​​​​​​​​​​A person cannot hold more than one PAN. If a PAN is allotted to a person, then he cannot apply for obtaining another 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).

Who needs to link Aadhaar and PAN?

Section 139AA of the Income Tax Act provides that every individual who has been allotted a permanent account number (PAN) as on the 1st day of July, 2017, and who is eligible to obtain an Aadhaar number, shall intimate his Aadhaar number in the prescribed form and manner. In other words, such persons have to mandatorily link their Aadhaar and PAN before the prescribed date (Presently, 31.03.2022 without fee payment and 30.06.2023 with prescribed fee payment).

For whom is Aadhaar-PAN linkage not compulsory?

Aadhaar-PAN linkage requirement does not apply to any individual who is:

• • Residing in the States of Assam, Jammu and Kashmir, and Meghalaya;
• • a non-resident as per the Income-tax Act, 1961;
• • of the age of eighty years or more at any time during the previous year; or
• • not a citizen of India.

How to link Aadhaar and PAN?

Both registered and unregistered users can link their Aadhaar and PAN on the e-Filing portal (www.incometax.gov.in), in both pre-log in and post login mode.

What will be the consequences if I do not link Aadhaar with PAN till 30th June 2023?

If you do not link your Aadhaar with PAN till 30th June 2023, your PAN will become inoperative. If PAN becomes inoperative, you will not be able to furnish, intimate or quote your PAN and would be liable to all the consequences under the Act for such failure. This will have a number of implications such as:

1. You shall not be able to file return using the inoperative PAN.
   
2. Pending returns will not be processed.
   
3. Pending refunds cannot be issued to inoperative PANs.
   
4. Pending proceedings as in the case of defective returns cannot be completed once the PAN is inoperative.
   
5. Tax will be required to be deducted at a higher rate as PAN becomes inoperative.
   

These consequences shall take effect from 1st July, 2023 and continue till the PAN becomes operative. A fee of one thousand rupees will continue to apply to make the PAN operative by intimating the Aadhaar number.