PAN-Uses and Its Benefits

A Permanent Account Number (PAN), issued by the Indian Income Tax Department, is an electronic system in which all the tax-related information of a person or company is recorded against a single PAN number, in the form of a laminated “PAN Card”. In this article, we will discuss the uses and benefits of PAN.

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PAN card is issued under the supervision of the Central Board for Direct Taxes (CBDT). It also serves as an important proof of identification. It is, also issued to foreign nationals (such as investors) subject to a valid visa. So, it is not acceptable as proof of Indian citizenship. The PAN is mandatory for a majority of financial transactions such as opening a bank account, receiving a taxable salary or professional fees, sale or purchase of assets above specified limits, etc.; especially high-value transactions.

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Structure of PAN Card

• The number encrypted on PAN  is a ten-character long alpha-numeric unique identifier.
• The first five characters are letters (in uppercase by default), followed by four numerals, and the last (tenth) character is a letter.

• The first three characters are normal alphabetic series starting from AAA to ZZZ. Department of I.T allocates the digits randomly which is a combination of the letters like AXT or XRT.
• The fourth character represents the status of the PAN cardholder. For a majority of PAN holders fourth letter is the letter “P”, which stands for “person”. Other letters are C, H, F, A, T, B, L, J, and G.

C – Company   H – Hindu Undivided Family   F – Firm    A – Association of Persons

T – Trust   B – Body of Individuals    L – Local Authority   J – Artificial Juridical Person

G – Government

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• The fifth character represents the first alphabet of the PAN holder’s last name or surname.
• The next four characters are sequential numbers starting from 0001 to 9999.
• The tenth character is an alphabetic digit used to verify the validity of that current code.

PAN card also consists of:

• Name of the cardholder(Individual or Company).
• Name of the father of the cardholder.
• Date of birth/date of registration in case of companies.
• Signature of the Individual.
• Photograph of the Individual.

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PAN- Uses and Benefits

• Proof of Identity: It serves as a valid identity proof for age, for applying for a passport, driving license, etc. All tax payees, persons in the economic or financial sector should obtain PAN. Under Section 160 of IT Act, 1961, a non-resident, minor, lunatic, idiot, and a court of wards and such other persons may be represented through a Representative Assessee(will be the applicant).
• Opening a bank account requires PAN details for savings or a current account in both private and nationalized banks.
• For loans, fixed deposits, cash deposits, bank drafts, banker’s cheque, pay orders, also need PAN card details.
• Deposits with the post office, co-operative banks, non-banking financial companies, need PAN details, for an amount greater than 5 lakh.
• Also, for applying for a credit or debit card, the bank needs PAN card details to be furnished by the applicant.
• It is also essential for opening Demat Account, to hold shares in dematerialized form.
• IT Returns Filing: All individuals and entities who are eligible for Income tax are expected to file their IT returns. A PAN card is necessary for the filing of IT returns and is the primary reason individuals, as well as other entities, apply for one.
• To claim tax deductions and tax refunds.
• For buying or selling a motor vehicle, except two-wheelers above five lakh. For such transactions, one must provide PAN card details.
• To purchase of jewelry worth above 5,00,000.
• For purchasing or selling immovable assets, valued more than 10,00,000, the PAN is mandatory.
• Telephone connections- PAN details are to be submitted to cellular operators.
• Persons with valid PAN are only eligible for gas connections.
• To pay Insurance Premiums above Rupees 5 lakh.
• For foreign travel, making bill payments exceeding 25,000/-.
• It is advantageous for government bodies too for preventing fraudulent transactions, tax dodging and it also improves transparency during transactions.

The online applications for applying a PAN card can be made either through the portal of NSDL or UTITSL. The charges for applying for PAN is Rs. 93 (Excluding GST) for Indian communication address and Rs. 864 (Excluding GST)for foreign communication address. Through credit/debit card, demand draft or net-banking payment can be made. 

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All these about the uses and benefits of having a PAN card. Entri is the best platform to start your preparation for the Government job. Plan your exam strategy with us. Good luck to all!