PAN and Aadhaar

Permanent Account Number (PAN)

Introduction

PAN is a ten-digit alphanumeric identifier issued by the Income-tax Department to identify taxpayers uniquely. It is mandatory for income-tax filings, high-value financial transactions, and correspondence with the tax authorities. Aadhaar can be used in lieu of PAN.

How to obtain PAN

• A resident applies for PAN in Form 49A, while a foreign citizen applies in Form 49AA.

• For company incorporation, PAN is allotted through Part B of the SPICe+ form

• For LLP incorporation, PAN can be applied through Form FiLLiP.

Who Should Obtain PAN?

• Individuals with taxable income exceeding the exemption limit.

• Businesses or professionals with gross receipts exceeding Rs. 5 lakh.

• Every person receiving income from property held under trust or legal obligation, wholly or partly for charitable or religious purposes, and liable to be assessed as a representative assesse in respect of such income.

• Entities conducting financial transactions of Rs. 2.5 lakh or more annually.

• Any person acting as MD, director, partner, trustee, author, founder, Karta, CEO, principal officer, office bearer

• Authorised representative of an entity with financial transactions of Rs. 2.5 lakhs or more in a year.

• Persons entitled to receive any sum subject to TDS/TCS.

• Persons depositing or withdrawing cash of Rs. 20 lakh or more annually.

• Persons opening current or cash credit accounts (exceptions for non-residents under specific conditions).

• Any other persons notified by the Central Govt..

Mandatory Quoting of PAN

Quoting of PAN is mandatory in the following circumstances:

o If receipts/payments are subject to TDS/TCS;

o In all returns, challan or income-tax correspondence

o In certain financial transactions such as:

o Sale or purchase of a motor vehicle (other than two-wheelers)

o Opening an account [other than a basic savings bank deposit account] with a bank or a co-op. bank

o Time deposits with banks, co-op banks, post offices, Nidhis, or NBFCs exceeding Rs. 50,000 per transaction or Rs. 5 lakh in a year.

o Making an application for issue of a credit or debit card;

o Opening of a Demat account and more…

Interchangeability with Aadhaar

• If a person has Aadhaar but no PAN, quoting Aadhaar in specified transactions is treated as an application for PAN, with no separate documents required.

• If a person has PAN linked with Aadhaar (Sec. 139AA), Aadhaar can be quoted in place of PAN for all transactions where PAN is mandatory.

Exemptions from Quoting PAN

• Minor may quote PAN of parent/guardian if he has no taxable income.

• Form 60 Declarations: The form allowed for individuals (not companies/firms) who do not have PAN. Form 60 is furnished for specified financial transactions.

• A foreign company may submit Form instead of PAN if:

a) It has no income chargeable to tax in India;

b) It does not have PAN;

c) The transaction is in an IFSC banking unit; and

d) The transaction relates to opening an account or time deposit

o As per Rule 114AB, a non-resident, not being a company or a foreign company, shall not be required to obtain and quote PAN if the specified conditions are satisfied.

Consequences of Non-Compliance of PAN

• Penalty under Section 272B for failure to obtain or quote PAN.

• Having Multiple PANs: Attracts penalty under section 272B

• Rs. 10,000 penalty for quoting false PAN or failure to quote PAN or failure to authenticate it.

• Higher TDS/TCS rates apply if PAN is not quoted (Sections 206AA and 206CC).