Just as colleges issue mid-term report cards to assess a student’s academic progress, and financial institutions use credit reports to evaluate financial risk, every citizen in India is issued a Permanent Account Number (PAN) card as a crucial civic and financial identity document.
The Income Tax Department (ITD) issues this tangible card. You can use it to verify financial transactions, file taxes, open bank accounts, invest in mutual funds, secure a personal loan, or even use it as ID proof. In this blog, we will delve into the details of what is PAN card and the key use cases that make the polycarbonate card instrumental for financial transactions and tax-related matters within India.
A Permanent Account Number (PAN) is a unique 10-character code of letters and numbers issued in the form of a laminated card. It is allotted under Section 139A of the Income Tax Act, 1961, to any ‘person’ who applies for it or to whom the department assigns the number without an application.
Every time you engage in a financial transaction as an individual or an entity where quoting your PAN is required, that transaction is recorded and linked with your unique PAN number. The linking of various documents enables the ITD to detect and combat tax evasion, widen the tax base, and consolidate all your financial activities under a single identifier.
| Content | Description |
|---|---|
| Name of the cardholder | Full name of the individual, partnership firm, limited liability partnership (LLP), or company |
| Father’s name | Applicable only to individual cardholders. |
| The father’s or mother’s name (in case of a single parent) | |
| Date of Birth |
For individual cardholders: Date of birth For companies: Date of incorporation For LLPs: Date of incorporation/registration |
| PAN number | It is a unique 10-digit alphanumeric number. Each character provides specific information about the cardholder’s type and identity. |
| Signature | For individuals, a PAN card verifies their signature for financial transactions. |
| Photograph | PAN acts as a valid photo identity document for individual cardholders. However, a PAN card for companies and firms does not include a photograph. |
PAN card number example: CRBPS2611A
| Characters | Importance |
|---|---|
|
First three characters
|
Alphabetical and form a random series from AAA to ZZZ
Example: CRB
|
|
Fourth character
|
Status of the PAN card holder.
Example:
'A' for AOP (Association of Persons)
'B' for Body of Individuals (BOI)
'C' for Company
'F' for Firm
'G' for Government
'H' for HUF (Hindu Undivided Family)
'J' for Artificial Juridical Person
'L' for Local Authority
'P' for Individual
'T' for Association of Persons for a Trust
|
|
Fifth character
|
First letter of the PAN holder's surname (for individuals) or the
first letter of the entity's name (for non-individuals)
Example: S
|
|
The next four characters
|
Sequential numbers ranging from 0001 to 9999
Example: 2611
|
|
Last character
|
An alphabetic check digit to ensure the uniqueness and validity of
the
PAN card number
Example: A
|
| PAN Card Types | Who Can Use |
|---|---|
| Individual PAN | For citizens filing taxes, ID, banking, and investing |
| Company PAN | For registered companies, corporate tax and operations. |
| Firm PAN | For firms/LLPs separate from partners’ PANs |
| HUF PAN | For HUFs managing family assets/income |
| Trust PAN | For public/private trusts, tax compliance and managing objectives |
| AOP & BOI PAN | For common purpose groups filing a collective tax |
| Government entity PAN | For government departments managing finances |
| AJP PAN | For universities, local authorities, and for financial/tax needs |
| List of tax-paying entities | |
|---|---|
| Individual, including minors and students | Government |
| Hindu Undivided Family (HUF) | Local Authority |
| Company | Artificial Juridical Person |
| Firm | Association Of Persons (AOP) |
| Limited Liability Partnership (LLP) | Body Of Individuals (BOI) |
| Trust | Foreigners |
One of the many documents required when starting a business is a PAN card, a mandatory identity proof laid down by the Government of India. Later, you also need a Tax Registration Number (TRN) to trade and file tax returns, and you can only obtain the TRN with a valid PAN card.
If you are planning to open a savings or current account with a public, private, or corporate bank, you are required to submit a PAN card as one of the proof of identity documents. It is a critical component of the KYC process, as the PAN is used to link all financial transactions to an individual and comply with financial regulations.
Your PAN card is essential for accurate tax deductions. If you earn money from which tax is deducted (like a salary or interest), you must give your PAN card details to the person or company paying you. If you don’t, they are legally required to deduct tax at a much higher tax rate of 20% or more instead of the standard rate. Additionally, a penalty of ₹10,000 under section 272B can be levied for failure to obtain PAN when liable, quoting a wrong or invalid PAN number on a document, or intimating incorrect PAN to the person deducting or collecting tax.
Each taxpayer receives a distinct 10-character alphanumeric identifier on their PAN card. The unique PAN number assists the government to perform several key areas: it promotes transparency, enables the oversight of financial transactions, and helps prevent tax evasion.
A PAN card helps banks and financial institutions verify the legitimacy of borrowers, understand the applicant’s financial standing, and historical transactions. Hence, irrespective of applying for a secured or unsecured loan, submitting a PAN card to banks and financial institutions that lend loans is required.
Read on: PAN 2.0 Project: What’s New?
Now that you understand what is PAN card and the significant power it holds in the lives of every Indian citizen, recognise its dual role: it assists cardholders to access a wide range of financial services and enables the government to streamline tax-related matters and transactions of individuals and entities.
Additionally, you can use your PAN card as one of your identity documents when you are applying for a personal loan via Quid. The loan aggregator platform is digital and offers a paperless loan application process to help you access your financial funding more easily.
Yes, a PAN card is an important proof of identity for individuals with taxable income who intend to file an ITR, as well as for businesses engaged in regular transactions.
No. You can have only one PAN number allotted to your name. If you do not follow the regulations, it can result in a penalty fee of Rs. 10,000 under Section 272B of the Income Tax Act, 1961.
No, a PAN card is valid for a lifetime.
PAN card, a polycarbonate card, is an important identity proof required when starting a business, opening a bank account, obtaining a gas connection, filing income tax, or even to combat fraud or money laundering.
Yes. It helps identify individuals with a single PAN card and prohibits the issuance of multiple PAN cards to the same person.
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