Permanent Account Number (PAN) — Explained

This document covers

1. What is PAN?
2. Who are required to apply for PAN?
3. Transactions for which quoting of PAN is mandatory
4. Inter — Changeability of PAN with the Aadhaar number
5. How to apply for PAN?
6. Estimated processing time to get a new PAN?
7. Penalties

1. What is PAN?

PAN is a 10-digit alphanumeric number issued by the Income Tax Department. PAN is the short form of Permanent Account Number. Ex: AAAPA1234A

PAN enables the Income tax department to identify or link all transactions of PAN holder with the Income tax department.

The 10 digit alphanumeric numbers in PAN represents the following

• First 3 Characters of PAN — alphabetic series running from AAA to ZZZ
• 4th Character — Status of PAN holder
  • P — Individual
  • C — Company
  • H — Hindu Undivided Family
  • A — Association of Persons
  • B — Body of Individuals
  • G — Government Agency
  • J — Artificial Juridical Person
  • L — Local Authority
  • F — Firm/ Limited Liability Partnerships
  • T — Trust
• 5th Character — first character of the PAN holder's last name/surname in case of individual and in case of Non-Individual, first character of PAN holder’s name.
• Next 4 characters (Numeric) — sequential numbers running from 0001 to 9999
• Last Character (10th character) — alphabetic check digit.

2. Who are required to apply for PAN?

• Every Person if their total income during the previous year exceeds the Basic exemption limit (Rs 2,50,000/Rs 3,00,000)
• Every Person carrying on any business or profession whose sales, turnover or gross receipts likely to exceed Rs 5 lakhs during previous year.
• Charitable Trust who are required to file Income Tax returns u/s 139(4A)
• Every Non individual resident person who enters into a financial transaction of an amount aggregating to Rs 2,50,000 or more in a financial year.
• Every person who is a managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of any person referred above
• Every person who wants to enter into specified financial transactions.
  • Every Person who wants to deposit Cash in bank, post office or co- operative bank if the amount of cash deposit is Rs 20 lakhs or more
  • Every Person who wants to withdraw cash from bank, post office or co-operative bank if the amount of cash withdrawal is Rs 20 lakhs or more.
  • Every person who wants to open a current account or cash credit account with a bank, post office or co-operative bank.
• Any person who is required to file an income tax return (ITR) due to any other reason.

3. Transactions for which quoting of PAN is mandatory

3.1. Accounts requiring PAN

1. Opening an account with a bank, a co-operative bank or a financial institution. You may open a Basic Savings Bank Deposit Account without a PAN card but shuch account would have a maximum balance limit of Rs. 50,000.
2. Making an application for the issue of Credit or Debit Card
3. For opening of a Demat Account to buy or sell equities, mutual funds and/or other market products.

3.2. Common transactions requiring PAN

1. Payment in cash exceeding Rs 50,000 to a hotel or restaurant against a bill or bills at any one time
2. Payment in cash exceeding Rs 50,000 in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
3. Cash Deposits exceeding Rs 50,000 during 1 day with a banking company or post office
4. Payment in cash for an amount exceeding Rs. 50,000 during any one day for purchase of bank drafts or pay orders or banker's cheques from a banking company or a co-operative bank.
5. Sale or purchase of a motor vehicle or vehicle other than two wheeled vehicles irrespective of the transaction amount.
6. Purchase of Gold or jewellery more than Rs. 2 Lakhs
7. A time deposit of amount exceeding Rs 50,000 or aggregating to more than Rs 5 lakhs during a financial year with banking company, post office or cooperative bank.
8. Sale or purchase of goods or services of any nature other than those specified above for an amount exceeding Rs. 2 lakh per transaction.
9. Purchase of Mutual Fund units for an amount exceeding Rs 50,000 without a demat account.
10. Purchase of Debentures or bonds issued for an amount exceeding Rs 50,000 without a demat account.

3.2. Other uncommon transactions requiring PAN

1. Payment in cash or by way of a bank draft or pay order or banker's cheque of an amount aggregating to more than Rs. 50,000 in a financial year for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 to a banking company or a co-operative bank or to any other company or institution.
2. Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer.
3. A contract for sale or purchase of securities (other than shares) for amount exceeding Rs. 1 lakh per transaction.
4. Sale or purchase of shares of a company not listed in a recognised stock exchange for amount exceeding Rs. 1 lakh per transaction.
5. Sale or purchase of any immovable property for an amount exceeding Rs. 10 lakh or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
6. Purchase of bonds issued by Reserve Bank of India for an amount exceeding Rs 50,000

NOTE: When a minor enters the previously mentioned transaction, the minor must provide the PAN of their father, mother, or guardian, as applicable.

4. Inter-changeability of PAN with the Aadhaar number

Every person who is required to quote the PAN can intimate his Aadhar number in place of PAN w.e.f 01st Sep 2019, if

• the person has not allotted a PAN but possess the aadhaar number
• the person has been allotted PAN and has intimated aadhaar number to prescribed authority.

5. How to apply for PAN?

• Income Tax Department has authorised UTI Infrastructure Technology and Services Limited (UTIITSL) and National Securities Depository Limited (NSDL) [now protean] to set-up and manage PAN Service Centers.
• The persons who wants to apply for PAN needs to submit online PAN application in Form 49A/49AA along with required documents and prescribed fee.
• A Resident person shall apply for PAN in form 49A and a non-resident person including a foreign company shall apply for PAN in form 49AA.
• As per Section 139AA, every person who is eligible to obtain Aadhaar is required to quote his Aadhaar number in the PAN application form with effect from 1st day of July, 2017.

6. Estimated processing time to get a new PAN?

After applying, the PAN card takes 10 to 20 working days to arrive at your address, including delivery.

Check your PAN status using the acknowledgement number.

7. Penalties

• A penalty of Rs 10,000 will be levied
  • If a person is holding more than 1 PAN
  • If a person fails to quote or intimate PAN or aadhaar or quotes invalid PAN or Aadhaar
  • If a person fails to quote PAN in specified financial transactions
• A penalty of Rs 1,000 will be levied, if a person fails to link PAN and aadhaar, PAN will become inoperative and the person is required to pay penalty for non-linking.