Permanent Account Number or PAN is a ten-digit unique alphanumeric number issued by the Income Tax Department. Out of the first five characters, the first three characters represent the alphabetic series running from AAA to ZZZ. The fourth character of PAN represents the status of the PAN holder. “P” stands for Individual “C” stands for Company “H” stands for Hindu Undivided Family (HUF),”G” stands for Government Agency “L” stands for Local Authority “E” stands for Limited Liability Partnership “F” stands for Firm “T” stands for Trust etc.
PAN Card can be obtained by Indian nationals, entities, foreign nationals and entities. The Income Tax Act permits one person to have only one PAN.
Fifth character of PAN represents the first character of the PAN holder’s last name/surname in case of an individual. In case of non-individual PAN holders fifth character represents the first character of PAN holder’s name.
Utility of PAN
PAN enables the department (IT) to identify/ link all transactions of the PAN holder with the department. These transactions include tax payments, TDS/TCS credits, returns of income, specified transactions, correspondence etc, and so on. It facilitates easy retrieval of information of PAN holder and matching of various investments, borrowings and other business activities of PAN holder.
Several transactions need mandatory PAN quoting for every person except the Central Government, the State Governments and the Consular Offices. This include: A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with – (i) a 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 financial company. Sale/ purchase of immovable properties exceeding Rs.10 lakh need PAN. There are similar requirements for various transactions and especially after demonetisation, PAN has emerged as the powerful financial identity.
Minors can also obtain PAN card. If minors have income it should be added to the income of his parent/guardian. Similarly, minor person can quote PAN of his father or mother or guardian provided he does not have any income chargeable to income-tax.
PAN as the Common Business Identification Number
PAN has now taken on the role of “identifier” beyond the Income tax department as it is now required for various activities like opening of bank account, opening of demat accounts, obtaining registration for Service Tax, Sales Tax / VAT, Excise registration etc. PAN is leveraged to become Common Business Identification Number (CBIN) or simply Business Identification Number (BIN) for providing registration to a number of government departments and services.