Permanent Account Number (PAN) is unique alphanumeric combination issued to all juristic entities identifiable under the Indian Income Tax Act 1961.
It is issued by the Indian Income Tax Department under the auspices of the Central Board of Direct Taxes (CBDT) and is almost equivalent to a national identification number.
It also serves as an important ID proof. This number is almost mandatory for financial transactions such as opening a bank account, receiving taxable salary or professional fees, sale or purchase of assets above specified limits.
The primary purpose of PAN is to bring a universal identification key factor for all financial transactions and indirectly prevent tax evasion by keeping a track of monetary transactions of high net worth individuals.
The PAN is unique, national, and permanent. It is unaffected by a change of address, even between states.
This number can be considered to be similar to Social security number issued in United States to citizens and other legal residents.
1. PAN stands for Permanent Account Number (PAN).
It is a 10 digit alphanumeric number, issued in the form of a laminated card called the ‘PAN Card’, by the Income Tax Department of India.
The government has made PAN mandatory to be quoted on the tax returns & all financial correspondence that happen in India.
It is also compulsory to quote PAN Number in all documents pertaining to economic or financial transactions.
2. Structure and validation.
01) PAN structure is as follows: AAAAA9999A: First five characters are letters, next 4 numerals, last character letter.
02) Each assesses is uniquely identified by the PAN.
03) If the PAN does not follow the above structure, then the PAN will be shown invalid.
04) The Fourth character of the PAN must be one of the following, depending on the type of assesses:
C — Company.
P — Person.
H — Hindu Undivided Family (HUF).
F — Firm.
A — Association of Persons (AOP).
T — AOP (Trust).
B — Body of Individuals (BOI)
L — Local Authority.
J — Artificial Juridical Person.
G — Government.
05)The fifth character of the PAN is the first character in the Surname of the person to whom the PAN belongs.
As per the current Income Tax Rules $ Regulations read with Income Tax Act, PAN CARD is Compulsory to quote in the following types of transactions.
1):-Purchase of Assets.
B) Mutual Funds.
3):-. Transaction with Banks / Post Office
4):- Payments to hotels and restaurants against their bills for an amount exceeding Rs.25,000 at any point of time;
5):- Cash payment exceeding Rs.25,000 in connection with travel to any foreign country at any point of time;
6):-. Demat account opening
7):- Getting Loan
8):- Applying for VISA or Passport
9):- Rental Income