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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-PAN is our identification with Income Tax Department. Income Tax department links various transactions entered by someone with his/her PAN. Presently its mandatory to quote PAN at many places. Apart from being mandatory in many cases, PAN also works as an identity proof and also as a Date of Birth proof (DOB) at most of the places.

Lets try to understand about what these ten alphanumeric characters of our PAN represent. 

From 1st July 2017, newly inserted Section 139AA of the Income Tax Act makes it mandatory to quote AADHAR in your Income Tax Return and/or while applying for Permanent Account Number(PAN). Read in detail...

What do these 10 Alphanumeric characters represent?

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 with above description, You will really find it interesting.

Who should/must have PAN?

The above explained are all the interesting facts about PAN. We must also be aware about who is mandatorily required to have a PAN. Following persons must have PAN:
  • 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?

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. 25000
    • Payment at the time of getting a bank draft of Rs. 50000 or more
    • Making a deposit of Rs. 50000 or more with bank in one day
    • Cash payment for foreign travel of an amount exceeding Rs. 25000
We all must be aware about how PAN machanism works? Income Tax department has tried to make use of PAN in most of high value financial transactions. Where ever PAN is disclosed, the transaction will automatically be linked to that PAN and can easily be traced at IncomeTax. This way IT people try to streamline and link different transactions entered by a PAN holder.

Now as the systems are automated, you can also view various transactions under your PAN which are reported to Income Tax department, by viewing your 26AS. Making PAN mandatory in high value transactions is a move to control the flow of undisclosed money to some extent. 

Click here to know- How to apply for PAN?

Some quick links:
How to E-verify your IT Return
Form 26AS/Tax Credit Statement
Taxability of gifts in India
TDS on property purchase
Avoid TDS by Form 15G and Form 15H
How to apply for PAN?

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