In India, PAN (Permanent Account Number) is a plastic card with ten character alphanumeric code combination, name of the individual, date of birth, date of establishment in case of the business, signature, and picture of the individual allotted by the Indian Income Tax Authorities to individuals and registered entities. The PAN’s key function is as an all-in-one form of identification, but it also acts as a factor for all financial transactions; thereby, maintaining a track record of an individual’s financial transactions. Through this, PAN helps in avoiding tax evasion and support compliance of applicable laws.
Indian Income Tax Law mandates that the following types of individuals should apply for a PAN:
- Every person whose total income exceeds the maximum amount not chargeable to tax;
- Every person, carrying on any business or profession, whose total turnover or gross receipts exceed the threshold limit in a year; or
- Any person required to file a return of income.
How to apply for PAN Card
- PAN applications are made through forms, designated separately for individuals and foreign nationals. Form 49A is for Indian citizens and Form 49AA is for foreign nationals.
- In order to apply for a PAN in the first place, basic information such as name, address (both permanent and official), contact number, valid E-mail address, father’s name, and date of birth are required, in addition to the provision of supporting material including a photograph. However, requirement for documents do differ regionally and depend on the applicant’s status.
Significance of PAN
Apart from the above-mentioned factors, importers, exporters and those intending to get themselves registered as manufacturers, traders or service providers in India are required to obtain a PAN. Meeting the following criteria makes PAN registration mandatory as of January 1, 2017:
- If your income exceeds the threshold limit of (Rs. 250,000) in a given financial year
- Sale or purchase of immovable property valued at US$14,685 (Rs. 10,00,000) or more, the PAN should be disclosed in the documents pertaining to the purchase or sale of the property.
- Sale or purchase of a motor vehicle requiring registration other than two-wheelers.
- Cash payment of US$735 (Rs. 50,000) or more per day for the purchase of bank drafts, pay orders or bankers’ checks during any one day
- Cash payment exceeding US$735 (Rs. 50,000) at a time in connection with travel to any foreign country (fare or purchase of foreign currency)
- Payment to hotels and restaurants against bills exceeding US$735 (Rs 50,000) at any one time
- Opening a bank account
- Application for issuance of a credit card
- Cash deposits of US$735 (Rs 50,000) or more with any bank during any one day
- Payment of US$735 (Rs 50,000) or more to a mutual fund for purchase of units, or to a company for acquiring its shares, or to a company/institution for acquiring its debentures/bonds, or to the RBI for acquiring bonds.
- Life insurance premiums exceeding US$735 (Rs 50,000) a year.
- Purchase/sale of any goods or services (including jewelry) exceeding US$2,937 per transaction.
The above developments come as the government looks to tighten sources of black money and widen the tax base. While obtaining a PAN is optional, the aforementioned criteria makes it practically impossible to do majority of the transactions without a PAN Card and it is mandatory to obtain a PAN Card even for foreign nationals who are Residents in India for more than 182 days in a year. Most companies In India require employees to provide PAN number for paying salaries in excess of Rs 5,00,000 per annum as they are required by law to deduct a TDS on salary paid to their employees. It is therefore imperative to get a PAN while working in India.