PAN or Permanent Account Number is a 10 digit alpha-numeric identity issued by the Income Tax Department of India. It is a unique account number allocated by the Income Tax Department, which is used to track and manage all the Income Tax assessee in India.
Although the PAN card application is voluntary, it must be obtained before engaging in certain transactions. For entering into a financial transaction exceeding a specified amount, quoting PAN is compulsory. Also, every business entity must apply for PAN card application within the 30 days of its formation or incorporation.
All individuals and entities who are eligible for Income tax are expected to file their IT returns. A PAN card is necessary for filing of IT returns, and is the primary reason individuals, as well as other entities, apply for one.
PAN card serves a valid identity proof. Other than voter card, Aadhaar card, PAN card is also accepted by all financial institutions and other organisations as an identity proof.
One of the essential reasons to get a PAN card is for the purpose of taxation. If the entity or person has not linked the PAN number with his bank account, and the annual interest earnings on savings deposits is more than Rs. 10,000/- then the bank would deduct 30% TDS instead of 10%.
Many times, the TDS deducted from a taxpayer’s income is more than the actual tax that he is supposed to pay. In order to claim excess tax paid, taxpayer has to have a PAN linked to his bank account.
In order to start a business, a company or any other entity mandatorily needs to have a PAN registered in the name of its entity. Tax Registration Number (TRN) is needed for a business which is obtained only if the entity has a PAN.
All public, private and co-operative banks have made it mandatory for an individual or a company to have a bank account in its name in order to open a savings or current account. Only under Pradhan Mantri Jan Dhan Yojana, a person can open a zero balance account by using voter card or other identity proof.
PAN card is also mandatory for an individual or entity to open a Demat Account, which is needed to hold shares in dematerialized form.
One of the benefits of pan card is eligibility of an individual or entity to enter into transactions of sale or purchase of assets. PAN is required to be quoted in the deed made during sale or purchase of any immovable property valued at 10 lakh rupees or more.
Cash payment related with foreign travel of an amount more than Rs. 50,000/- inclusive of forex purchase requires PAN card
Deposits with post office, co-operative banks, non-banking financial companies, will also need PAN, deposits adding up to Rs. 5 lakh or more every year will require PAN
Payments more than Rs. 50,000/- for hotel and restaurant bills requires PAN to be given
Cash payment adding up to more than Rs. 50,000/- per year will need PAN to be furnished
Purchase or sale of any good or service for an amount more than Rs. 2 lakh per transaction will require PAN to be furnished
PAN card is needed for Bank Drafts, Pay Orders and Banker’s Cheque with a transaction more than Rs 50000/- in a day. This implies that the transactions more than 50000/- will only need PAN card.
Address Proof: Copy of Aadhar Card or other address proof, in case of individual
Photograph: Two passport size photograph, in case of individual
Birth Certificate: Copy of Birth Certificate, in case of Minor
Proof from Parents: ID proof and Address proof of any of the parent
2. Collection of required documents
1. Preparation and verification of Application
2. Handing the Application to Income Tax Authority
3. Sharing acknowledgment receipt
1. Government processing
2. Application processing by IT department