WHAT IS PAN?
Permanent Account Number (PAN) is a ten-digit alphanumeric number,
issued in the form of a laminated card, by the Income Tax Department, to any
"person" who applies for it or to whom the department allots the
number without an application.
PAN enables the department to link all transactions of the
"person" with the department. These transactions include tax
payments, TDS/TCS credits, returns of income, specified transactions,
correspondence, and so on. PAN, thus, acts as an identifier for the
"person" with the tax department.
PAN was introduced to facilitates linking of various documents,
including payment of taxes, assessment, tax demand, tax arrears etc. relating
to an assessee, to facilitate easy retrieval of information and to facilitate
matching of information relating to investment, raising of loans and other
business activities of taxpayers collected through various sources, both
internal as well as external, for detecting and combating tax evasion and
widening of tax base.
A typical PAN is AFZPK7190K.
First three characters i.e. "AFZ" in the above PAN are
alphabetic series running from
AAA to ZZZ
Fourth character of PAN i.e. "P" in the above PAN represents
the status of the PAN holder. "P" stands for Individual,
"F" stands for Firm, "C" stands for Company, "H"
stands for HUF, "A" stands for AOP, "T"
stands for TRUST etc.
Fifth character i.e. "K" in the above PAN represents first
character of the PAN holder's last name/surname.
Next four characters i.e. "7190" in the above PAN are
sequential number running from 0001 to 9999.
Last character i.e. "K" in the above PAN is an alphabetic
WHY IS IT NECESSARY TO HAVE PAN?
It is mandatory to quote PAN on return of income, all correspondence
with any income tax authority. From 1 January 2005 it has become mandatory to
quote PAN on challans for any payments due to Income
It is also compulsory to quote PAN in all documents pertaining to the
following financial transactions :-
1) Sale or purchase of a motor vehicle or vehicle other than two
2) Opening an account [other than a time-deposit
referred at point No. 12 and a Basic Savings Bank Deposit Account] with a
banking company or a co-operative bank
3) Making an application for issue of a credit or
4) Opening of a demat
account with a depository, participant, custodian of securities or any other
person with SEBI
5) Payment in cash of an amount exceeding Rs. 50,000 to a hotel or restaurant against bill at any one
6) Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country
or payment for purchase of any foreign currency at any one time.
7) Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its units
8) Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring
debentures or bonds issued by it.
9) Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds
issued by it.
10) Deposits of cash exceeding Rs.
50,000 during any one day with a banking company or a co-operative bank.
10A) Deposits of cash
aggregating to more than Rs. 2,50,000
during the period of 09th November 2016 to 30th December
2016 with a banking company, cooperative bank or post office.
11) Payment in cash for an amount exceeding Rs. 50,000 during any one day for purchase of bank drafts
or pay orders or banker's cheques from a banking
company or a co-operative bank.
12) A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs.
5 lakh during a financial year with -
banking company or a co-operative bank
(ii) a Post Office;
(iii) a Nidhi
referred to in section 406 of the Companies Act, 2013 or
(iv) a non-banking
13) Payment in cash or by way of a bank draft or
pay order or banker's cheque of an amount aggregating to more than Rs. 50,000 in a financial year for one or more pre-paid
payment instruments, as defined in the policy guidelines for issuance and
operation of pre-paid payment instruments issued by Reserve Bank of India under
section 18 of the Payment and Settlement Systems Act, 2007 to a banking company
or a co-operative bank or to any other company or institution.
14) Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to
15) A contract for sale or purchase of securities
(other than shares) for amount exceeding Rs. 1 lakh
16) Sale or purchase, by any person, of shares of
a company not listed in a recognised stock exchange
for amount exceeding Rs. 1 lakh per transaction.
17) Sale or purchase of any immovable property for
an amount exceeding Rs. 10 lakh or valued by stamp
valuation authority referred to in section 50C of the Act at an amount
exceeding ten lakh rupees.
18) Sale or purchase of goods or services of any
nature other than those specified above for an amount exceeding Rs. 2 lakh per transaction.
1) Minor person can quote PAN of his father or
mother or guardian provided he does not have any income chargeable to
2) Any person, who does not have PAN and enters
into any of above transaction, can make a declaration in Form No.60.
3) Quoting of PAN is not required by a
non-resident in a transaction referred at point No. 3 or 5 or 6 or 9 or 11 or
13 or 18.
4) Any person who has an account (other than a
time deposit referred at point no. 12 and a Basic Saving Bank Deposit Account)
maintained with a banking company or a co-operative bank. He will be required
to furnish his PAN or Form No.60 on or before 30-06-2017 if he has not quoted
his PAN or furnished Form No. 60 at the time of opening of such account or
PAN – LEGAL FRAMEWORK
The legal authority for allotment and use of the new series of PAN is
derived from Section 139A of the Income-tax Act, 1961. This section lays down
the framework for PAN, e.g, who is required to apply
for PAN, who else can apply for PAN, who will allot PAN, transactions where PAN
is required to be quoted, use of PAN in TDS certificates and TDS returns, that
one person can have only one PAN and the manner of applying for PAN.
The manner of applying for PAN is laid down in Rule 114 of the
Income-tax Rules, 1962. This rule, amended in 2011, also specifies the copies
of documents required to be submitted along with the PAN application (in form
49A or 49AA, as the case may be) as proof of identity and address of the PAN
Rule 114B lists down the documents in which PAN is required to be quoted
while entering into specified transactions/activities. Persons who do not have
PAN are exempted from quoting PAN on furnishing a declaration in Form 60. Rule
114C lists the persons to whom section 139A does not apply. These are persons
who have agricultural income by furnishing declaration in Form 61,
non-residents, and Central Govt./State Govt. and
Consular offices, where they are payers.
Penalty of Rs.10,000/- is imposable u/s 272B
for failure to comply with the provisions of section 139A.
Linking of PAN with Aadhar Number
As per section 139AA in the Income-tax Act,
1961, it is mandatory for every person, who is eligible to obtain Aadhaar, to
quote his Aadhaar number while applying for PAN or furnishing return of income
with effect from July 1, 2017.
If any person does not possess the Aadhaar
Number but he had applied for the Aadhaar card then he can quote Enrolment ID
of Aadhaar application Form in the ITR.
every person who has been allotted PAN as on the 1st day of July, 2017, and who
is eligible to obtain Aadhaar number shall intimate his Aadhaar number on or
before a date to be notified to the Income-tax Department. In case of failure
to intimate the Aadhaar number, PAN allotted to the person shall be made
inoperative after the date so notified.
PAN and AADHAR are interchangeable for Income-tax
Section 139A of the Income-tax Act, 1961,
prescribes various conditions under which an assessee is required to obtain
PAN. He needs to mention his PAN in all communications with the Income-tax
Dept. and while entering into specified financial transactions.
However, there can be situations where a person
entering into high-value transactions, such as purchase of foreign currency or
huge withdrawal from the banks, does not possess a PAN. Thus, the Finance (No.
2) Act, 2019, has provide for interchangeability of PAN with Aadhar. It has
been provided that every person who is required to furnish or intimate or quote
his PAN under the Income-tax Act, and who,-
has not been allotted a PAN but possesses the
Aadhaar number, may furnish or intimate or quote his Aadhaar in lieu of PAN.
Further, Income-tax department shall allot PAN to such person in prescribed
has been allotted a PAN, and who has linked his
Aadhaar number with PAN as per section 139AA, may furnish his Aadhaar number in
lieu of a PAN for all the transactions where quoting of PAN is mandatory as per