Permanent Account Number (PAN)

In certain instances, it is mandatory for Non-Resident Indians to possess a PAN card.

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What is the PAN Card?

In 1972, the concept of PAN was rolled out by the Indian government and was made statutory under section 139A of the Income Tax Act, 1961. Initially a voluntary process, PAN was made mandatory for all tax paying individuals in 1976.

A Permanent Account Number (PAN) card is a card issued under the Income Tax Act, 1961 and it contains a unique 10-digit alphanumeric code. This code is computer-generated and is unique to the holder of the card.

The PAN system of identification is a computer-based system that assigns unique identification number to every Indian tax paying entity. Through this method, all tax-related information for a person is recorded against a single PAN number which acts as the primary key for storage of information. This is shared across the country and hence no two people on tax paying entities can have the same PAN.

The PAN Card is not only issued to individuals. Companies and partnership firms can also avail a PAN Card and it becomes mandatory for such entities to have a PAN number when they are filing their income tax returns in India. Even in the case of individuals, minors, students and Non-Resident Indians (NRIs) can also apply for a PAN Card online.

When PAN is allotted to an entity, PAN Card too is given by the Income Tax Department. While PAN is a number, PAN Card is a physical card that has your PAN as well as name, date of birth (DoB), and photograph. Copies of this card can be submitted as proof of identity or DoB.

Your PAN Card is valid for lifetime because it is unaffected by any change in address.

What are the different types of PAN cards?

PAN cards are issued to different tax-paying entities. Based on that, the types of PAN are:

PAN Card for Indian Individuals
PAN Card for Indian Companies
PAN for Foreign Citizens
PAN for Foreign Companies

Why does one need a PAN Card?

PAN Card is important for taxpayers as it is necessary for all financial transactions and is used to track the inflow and outflow of your money. It is important when paying income tax, receiving tax refunds, and receiving communication from the Income Tax Department. That said, PAN continues to be necessary for a large number of monetary transactions. PAN Card also serves as a proof of identity.

Why does an NRI need a PAN Card?

An NRI is mandatorily required to possess a PAN card in the following scenarios:

If an NRI earns a taxable income in India.
If an NRI wishes to trade in shares, through depository or through broker
If he\she wants to invest in Mutual Funds.
If he\she desires to purchase some land or any other property in India for purpose other than trading.

What are the uses of a PAN card in financial transactions?

PAN needs to be quoted while paying direct taxes.
Taxpayers need to input their PAN when paying income tax.
While registering a business, PAN information needs to be furnished.
A lot of financial transactions require PAN information. Some of these transactions are:

Sale or purchase of property (immovable) which is valued at Rs.5 lakh or above
Sale or purchase of a vehicle except a two-wheeler
Payments made towards hotels and restaurants and which are above Rs.25,000
Payments made in connection with travel requirements to other countries. The amount in this case if it exceeds Rs.25,000, then you need to quote your PAN
Payments of more than Rs.50,000 towards bank deposits
Purchase of bonds worth Rs.50,000 or more
Purchase of shares worth Rs.50,000 or more
Purchase of insurance policy worth Rs.50,000 or more
Purchase of mutual fund schemes
Payments made for more than Rs.5 lakh towards purchase of jewellery and bullion
To remit money out of India
Transfer of funds from NRE to NRO account

What are the advantages of PAN Card?

The key uses of a PAN Card can be illustrated as follows:

For filing tax returns – Individuals and entities (companies, partnership firms, HUFs, etc.) are required to quote their PAN numbers whenever they file a tax return. This is a mandatory requirement. If there is no PAN card, individuals and entities would be required to pay a flat tax of 30% on their earning irrespective of the income-tax bracket they might fall in. So, for the purpose of taxation, a PAN number is required and one can check PAN card status by PAN number
Registration of business – companies, partnership firms, Hindu Undivided Families or other entities who seek registration of their businesses cannot do so if they do not have a PAN number to quote in the registration details.
For conducting financial transactions – A host of financial transactions can be done only if the PAN card no. of the individual/entity is available. Some common transactions facilitated by the PAN card include sale or purchase of any immovable property the value of which is Rs.5 lakhs and above, sale or purchase of any vehicle except a two-wheeler, depositing any amount higher than Rs.50,000 in a bank, buying bonds valued at Rs.50,000 or above, remitting funds outside India, travel expenses made for travelling overseas if such expenses are in excess of Rs.25,000, buying mutual fund schemes, buying insurance policies or shares valued at Rs.50,000 and above, etc.
For availing utility connections – In many instances when utilities like a post-paid mobile phone connection, LPG connection, electricity connection, internet connection, etc. are required, a PAN card comes in handy. However, it is always recommended that you use alternate ID proof such as DL, Voter ID card, etc. if possible.
For opening a bank account – Nowadays the bank’s Know Your Customer (KYC) norms have become quite stringent and the PAN card is a primary requirement, banks carry out their individual number verification when opening a bank account.

Who issues a PAN Card?

PAN Card is issued by the Income Tax Department with help from authorised district-level PAN agencies, UTI ITSL (UTI Infrastructure Technology and Services Limited), and NSDL (National Securities Depository Limited). There are several TIN-Facilitation Centres and PAN centres across the country, run by NSDL that help citizens get their PAN Card.

How much does a PAN card cost?

An individual can make an online application for his or her PAN card. This can be done through the NSDL website or the UTITSL portal. The cost of application for PAN can be summed as follows:

For Indian communication address: Rs.93 (excluding GST)
For foreign communication address: Rs.864 (excluding GST)

Who is eligible for a PAN card?

Under section 139A of the Income Tax Act, the following taxpaying entities are required to have a Permanent Account Number:

Any person who has paid tax or is liable to pay tax to the Income Tax Department. This will be decided based on the tax slabs.
Any person who is carrying out a business or professional practice which earns him a yearly turnover of more than Rs.5 lakh in any year of assessment.
Importers and exporters who are liable to pay any form of tax or duty charges as per the Income Tax Act or as per any prevalent law
All kinds of trusts, charitable organisations, and associations.

All tax paying entities – minors, individuals, HUFs, partnerships, companies, body of individuals, trusts, and others – should apply for PAN.

What documents are required for a PAN card application?

While availing a PAN Card, some key documents are also required to be submitted along with the PAN Card application form (Form 49A or Form 49AA) or the acknowledgement form (if applying online) for PAN card verification process. The requirement of documents varies greatly depending on the applicant. Key documents which are required along with the PAN application form when individuals or other entities apply for a PAN card.

For Non-Resident Indians (NRIs)

A proof of identity which can be any one of the following:
- Passport copy
- Copy of PIO card issued by the Indian Government
- Copy of OCI Card issued by the Indian Government
- Copy of other national or citizenship Identification Number or TIN attested by applicable ‘Apostille’, Indian Embassy, High Commission or Consulate where the applicant is based.

Address proof can be any one of the following:
- Passport copy
- Copy of PIO card issued by the Indian Government
- Copy of OCI Card issued by the Indian Government
- Copy of other national or citizenship Identification Number or TIN attested by relevant ‘Apostille’, Indian Embassy, High Commission or Consulate
- Copy of bank statement of the residential country
- Copy of NRE bank statement in India
- Copy of resident certificate or Residential permit
- Copy of registration certificate issued by FRO
- Copy of VISA granted and appointment letter from any Indian company

For a Hindu Undivided Family (HUF)

An affidavit issued by the Karta of the HUF stating the name, address and the father’s name of every coparcener as on the date on which the application is made.
Identity proof, address proof and date of birth proof as in case of an individual for the Karta of the HUF.

For a company registered in India

A copy of the Certificate of Registration issued by the Registrar of Companies.

For firms and Limited Liability Partnerships formed or registered in India

A copy of the Certificate of Registration issued by the Registrar of Firms or Limited Liability Partnerships.
A copy of the Partnership Deed.

For Trust formed or registered in India

Copy of Trust Deed or a copy of the Certificate of Registration Number issued by a Charity Commissioner.

For an Association of Persons

Copy of Agreement/Certificate of Registration Number from Registrar of Co-operative Society or Charity Commissioner or other competent authority or any document issued by the Central/State Government which shows identity and address of applicant.

What happens if you do not have a PAN card?

If your income falls in the taxable bracket, not having a PAN card would result in:

Flat 30% tax on your earnings and wealth, as stipulated by the Income Tax Department of India. This rule applies to individuals, companies and all entities eligible for tax, including foreign nationals and firms registered outside India.
Not being able to purchase a motor vehicle, buy an immovable property worth over Rs. 10 lakh, or open a bank account, among other activities.
Businesses are unable to conduct a large chunk of their financial activities and procurement.