PAN or Permanent Account Number is an important document for Indian taxpayers that is issued by the Income Tax Department under Income-tax Act, 1961. A PAN maps the key financial information of a person or business, such as the details of Income Tax Return, earnings and investments. All the individuals, companies, associations, legal trusts etc, with taxable income are required to obtain a PAN card. A PAN card is a physical card that includes a 10 digit alphanumeric PAN number, holders’ name, date of birth (DoB), signature and photo. A person’s PAN card, ePAN or a copy of PAN can be used as proof of identification in India. One can apply for a PAN Card by filling an application form available free of cost online.
When was PAN introduced in India?
The Indian government first introduced the concept of PAN in 1972 as an optional document. It was made statutory under Income-tax Act, 1961, section 139A for all tax-paying individuals and businesses in 1976.
In November 2024, the Union Cabinet, led by Indian Prime Minister Narendra Modi, approved the PAN 2.0 Project, as an e-governance solution aimed to enable technology-driven transformation of PAN services. PAN 2.O is introduced to make taxpayer registration services easier and more accessible, thereby enhancing digital experience of the taxpayers. Some of the benefits under PAN 2.0 Project are – integration of platforms, use of technology for paperless processes, free of cost allotment, updation or correction in PAN card. Please note, the current valid PAN cards will remain fully operational as PAN 2.0 is an initiative to take PAN services to more and more people.
Now, let’s walk through the essential uses and benefits of the PAN card.
The Uses of PAN Card
PAN is a mandatory document and is required for one and all financial activities. For instance, PAN card is a mandatory proof of ID to open a bank account and to carry out other associated financial services. When seeking a job, you need to provide PAN card information so that your salary accounting and tax deduction are linked to it.
Further, one of the most significant uses of PAN is filing of an income tax return. There is a penalty for individuals and businesses making an earning and not using a PAN card to file an ITR. A person who owns more than one PAN is punishable by the court of Law. For taxpayers, who fail to comply with PAN-related provisions, a penalty for Rs 10,000 is imposed, under Section 272B of the Income-tax Act.
Here are the other scenarios where producing a PAN card is mandatory –
Business purposes
- While registering a new business or company, it is essential to provide PAN card information.
- PAN card is mandatory for availing GSTIN for a new business.
- With the help of a PAN card, TDS and TCS can be easily deducted and collected.
Tax related transactions
- One of the most important functions of PAN is facilitating payment of direct taxes.
- When filing the income tax returns, taxpayers are required to mention their PAN card details.
- Similarly PAN is required to claim tax refunds i.e. for claiming excess tax paid directly into your accounts.
Financial transactions
- PAN is required for opening a bank account – be it current and/or savings account, in both private and nationalised banks.
- PAN card is mandatory when you visit the bank to make cash deposits for more than Rs 50,000.
- Similarly, for making fixed deposits (FDs) of Rs. 50,000 or more, the bank requires PAN information.
- When you apply for credit cards & loans, PAN information is required.
- Even for investment purposes, i.e. when applying for a demat & trading account, investing in mutual funds etc., your PAN card details are submitted in the form.
Purchasing or selling high value items or services
- For sale or purchase of an immovable property, worth Rs 5 lakh or above, the PAN details are required to be produced to the authorities.
- For sale or purchase of a vehicle, except a two-wheeler, a PAN Card information of the registered owner is essential.
- While making a payment of more than Rs 25,000 to a hotel and/or restaurant, it is required to show a PAN card.
- Similarly, for making international travel bookings of more than Rs 25,000, it is mandatory to show a PAN Card to the travel booking agent.
- It is important to show a PAN card, while buying jewelry or bullion of more than Rs 5 lakh worth.
Proof of identity
A PAN card is a valid proof of identity for the Know Your Customer or KYC verification process. For example, while buying a new SIM Card or opening a DEMAT account, a PAN card is an important document.
International transactions
- While transferring money out of India, it is mandatory to carry a PAN Card.
- A PAN is essential for transferring money from a Non-Resident External (NRE) account to a Non-Resident Ordinary (NRO) account.
- In order to exchange the local currency to any foreign currency, you need to show a PAN Card.
Linking Aadhaar
As per the central government’s compliance policy, it is mandatory for the citizens of India to link the PAN Card with Aadhaar number to legally conduct financial operations.
Receiving professional fees
For a professional, it is essential to mention the PAN card on the invoices generated to clients for receiving payments of more than Rs 50,000.
Key benefits of the PAN card
Having a PAN Card brings to you a range of benefits while doing a job or business in India. Here are some of the key benefits that you can avail –
Document for identification
A PAN card is considered as a legitimate evidence of identity and proof of age across India. When applying for a new Adhaar card, Passport, Voter’s ID card, Driver’s License, or an electricity connection, a PAN Card is an essential identification evidence.
PAN Verification
By following the PAN verification process, a business can confirm and validate the authenticity. PAN Card acts as a unique identification tool for taxpayers in India. Thus, it enables the companies to verify if the key details, such as identity and financial history of individuals and businesses are correct or not, before they engage in business with them. This helps the companies in minimising the risk of getting in business with fraudulent or non-compliant parties.
Unique identification
The PAN Card acts as a tool for the government to control illegal activities, such as fraud and money laundering as it maps a unique identity to all the taxpayers of the country.
Simplified tax filing
A PAN Card is one of the essential documents for Income Tax Return (IT) filings in India. Since PAN Card links all your financial transactions, it facilitates simplified tracking of your income by the Income Tax department. Moreover, by using the 10 alpha-numeric digits of the PAN Card, one can easily login on the official Income Tax e-filing portal. Just type the complete PAN card number in the User ID field along with the password for a successful login.
Easy loan approvals
A PAN card makes it easier for the person to apply and obtain a home loan, car loan or personal loan as the card provides your financial history to the lender. There are a few lenders in the country these days that provide instant loans on a PAN card produced as a document. However, mostly the ticket size of PAN Card loans is small, ranging between Rs 2000 to Rs 50000, depending on the lender.
Check your CIBIL / Credit Score
Having a good CIBIL/ Credit score is absolutely essential. It is evaluated by all banks and non-banking financial corporations before lending funds to the applicant. One can check their Credit score and download the Credit report easily with the help of their PAN card within minutes.
Tracking your investments
With the help of your PAN Card, you easily track your investments.
Benefits for Minors
Minors do not require a PAN Card. However, parents/guardians can obtain a PAN card for their children, as it provides several benefits. The PAN card acts as a document of identification and age validation for the minors.
NRI PAN
An NRI can also apply for PAN. The PAN card not only acts as an identification document, but also as a doorway to accessing financial services in India such as stocks, mutual funds, real estate and more.
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