PAN stands for the permanent account number. It is a 10-digit alphanumeric (containing both alphabets and numbers) code that is imprinted on a laminated plastic card known as the PAN Card. PAN number is issued by the income tax department, govt. of INDIA, under the Income-tax Act 1961 to all taxpaying individuals and entities.
The department links all the transactions of the person. This transaction includes tax payment, TDS/TCS credit, returns of income/wealth/gift/FBT, specified transactions, correspondence, and so on. Thus, PAN acts as an identifier for the person with the tax department. This information is shared across the country hence no two people or tax-paying entities can have the same PAN.
History of PAN
Before the concept PAN was introduced there was a GIR number assigned to taxpayers. Since the GIR number was a manual system there could be higher chances of miscalculation and errors or cases of mistaken identity during tax assessment. In the year 1972, the PAN was introduced by the government of India and made statutory under section 139A of the income tax Act 1961. After that, it was abandoned in the year 1995.
Eligibility for PAN Card
Any individual or company having a source of income are eligible to apply for PAN Card.
Types of PAN Cards
2. Hindu undivided family (HUF)
7. Association of Persons (AOP)
8. Foreign Assessee / Non-residents
Need of PAN Card
PAN is mandatory for financial transactions such as receiving taxable salary or professional fees, sale or purchase of assets, buying mutual funds, and more. It is mandatory for many transactions including opening a bank account, filling out an income tax return, and registering a business.
As per Section 139A(5)(c) of the IT act “PAN is required to be quoted on transactions prescribed by CBDT”.
How to apply for PAN Card
Pan Card applications can be made online as well as offline.
Following websites for registering a PAN Card online:
Protean eGov Technologies Limited (formerly NSDL)
Documents required for PAN registration
The two main types of documents required for registration of PAN that is POA(proof of address) and POI(proof of identity)
POI- Aadhaar, voter id, driving license, etc
POA- domicile, utility bills, water bills, electricity bill, passport, etc.
For Companies –
A copy of the registration certificate of the company issued by the registrar of companies.
For Foreign Citizens-
You have to submit a copy of the PIO issued by the Government of India, a Copy of OCI issued by the Government of India, a Passport Copy, etc.
You have to submit Proof of Address can be a bank statement of the residential country, NRE Bank statement, Copy of VISA granted by an Indian company, registration certificate issued by FRO, etc.
You have to submit A copy of the Registration Certificate Number issued by a Charity Commissioner.
For Hindu undivided family-
You have to submit An affidavit of the HUF issued by the head of HUF along with POI/POA details.
Partnership Deed along with the certificate of registration of Firms/LLP
You have to submit a Certificate of Registration Number from the Registrar of Co-operative Society or Charity Commissioner
Benefits of PAN Card
1. PAN Card is used for filling income tax returns.
2. PAN Card is used in financial markets like trading and opening a Demat account.
3. For buying and selling of property such as land or house, PAN Card is important.
4. On linking the PAN number with one’s bank account, the bank would only deduct 10% TDS instead of a higher rate of 30% when the account holder’s annual interest earnings on savings deposits exceed Rs. 10,000/-.
5. Applying for a Car loan, or buying or selling a four-wheeler can be done easily with a PAN card.
6. With a valid PAN card, one can buy foreign currency above Rs. 50,000/- or more.
7. PAN Card can also be used as identification proof.
8. For buying jewellery of more than 5lakh, PAN Card is mandatory.
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