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Permanent Account Number - PAN

(A ten digit alphanumeric number issued by Income Tax Department of India)

Click here to know- How to apply for PAN?

Permanent Account Number - a ten digit Alpha-numeric number commonly called as PAN is basically our identity with the Income Tax Department. PAN is the medium through Income Tax department connects various transactions to a person or persons.

Its important to understand how  PAN machanism works?

Income Tax department has made disclosure of PAN compulsory in most of high value financial transactions. When PAN is disclosed, the transaction is automatically linked to that PAN holder and can easily be traced by authorities. This way Government tries to establish genuine and tax evading transactions. Making PAN mandatory in different transactions is ultimately to control the flow of undisclosed money to some extent.

Apart from being mandatory, PAN also works as an identity proof and as a Date of Birth proof (DOB) at most of the places.

With systems being automated now facility of generating E-PAN for existing PAN holders has been introduced.

Another very convenient option of Instant PAN is also available on e-filing portal of Income Tax for fresh PAN applicants. For valid AADHAR holders with updated mobile number, instant PAN will be a very quick and no cost option.

Do you know what these 10 digits of our PAN represent ?

Lets dig out deeper to understand about what these ten alphanumeric characters of our PAN represent. 

Dont miss to link PAN with AADHAR. How to link PAN & AADHAR Read in detail...

Lets take an example of PAN - AFPPK9898N belonging to Mr. Rajeev Kumar
  • First three characters - AFP are just randomly picked alphabetic characters.
  • Fourth character in a PAN tells us about the status of the PAN holder-
    • P - Individual
    • F - Firm
    • H - HUF(Hindu Undivided Family)
    • C - Company
    • A - AOP (Assosiation of Persons)
    • T - Trust
So here P - individual, which means Mr. Rajeev Kumar is an individual.
  • Fifth Character K is the first character of the PAN holder's surname here it is Kumar.
  • Now the four numbers are randomly picked numbers
  • The last tenth character is an alphabet which is called a check digit
Try to relate your PAN -fourth and Fifth character with above description, You will really find it interesting.

Who should/must have PAN?

PAN card is must for following:

  • Any person who is required to file Income Tax Return.
  • Any businessman or professional where their total sales or gross receipts are expected to be more then Rs. 5.00 lacs in a financial year
  • Any person entering in a transaction where quoting of PAN is mandatory(explained below)
  • From 01/04/2018 any entity not being an individual must quote PAN while entering any financial transaction of Rs. 250000 or more.
Why should I have PAN?
(Rule 114B of Income Tax Rules specifies the transactions and their monetary limit for quoting Permanent Account Number)

Its also important to understand about the transactions where we are required to quote PAN. It is compulsory to quote PAN in the documents related to following transactions:
  • It is mandatory to quote PAN while filing your Income Tax returns
  • PAN is must for availing TDS/TCS credits 
  • It is mandatory to quote PAN at the time of Income Tax payments
  • It is also compulsory to quote PAN at the time of entering in any of the following transactions:
    • Sale or purchase of immovable property of Rs. 5 lacs or more

    • Sale or purchase of a motor vehicle (not a two wheeler)

    • A fixed Deposit with Bank exceeding Rs. 50000

    • A deposit exceeding Rs. 50000 with Post Office Savings Account

    • Sale or purchase of securities exceeding Rs. 1 Lakh

    • At the time of opening a Bank Account

    • At the time of getting a phone connection(including cell phone connection)

    • Payment to hotels/restaurants at one go of an amount exceeding Rs. 50000

    • Payment at the time of getting a bank draft of Rs. 50000 or more

    • Making a bank deposit of Rs. 50000 or more in a single day

    • Cash payment for foreign travel of an amount exceeding Rs. 50000
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