Permanent Account Number (PAN)

What is a PAN?

A Permanent Account Number (PAN) is a unique 10-digit alphanumeric code India’s Income Tax Department issued to identify taxpayers. This number is a central database for an individual or entity's financial and tax-related transactions.
The PAN ensures that all tax activities, such as tax payments, TDS (Tax Deducted at Source), TCS (Tax Collected at Source), and income tax returns, are linked to a specific taxpayer, helping the government monitor financial activities.

What is a PAN Card?

The PAN card is the physical representation of your Permanent Account Number. It includes:

• PAN number
• Your name
• Date of birth
• A photograph

PAN Format Breakdown:

Example PAN: ABCTY1234D

• The first three characters (e.g., ABC) are random alphabets.
• The fourth character (e.g., T) identifies the PAN holder’s status (T for Trust, P for Individual, C for Company, etc.).
• The fifth character (e.g., Y) is the first letter of the PAN holder’s last name.
• The following four characters are unique sequential numbers (0001 to 9999).
• The last character is an alphabetic check digit.

Is PAN Mandatory?

Yes, a PAN is mandatory for all financial transactions and tax-related activities. The government requires individuals and businesses to use their PAN for:

• Submitting income tax returns
• Making tax payments
• Getting credits for TDS or TCS
• Keeping an eye on significant financial transactions

To guarantee a smooth tracking system for financial activity, the government has now enforced connecting your PAN with Aadhaar. The deadline for linking Aadhaar and PAN was on March 31, 2024.

Advantages of PAN

1. It helps simplify tax filing.
2. Tracks all transactions, including high-value purchases.
3. Acts as a recognised government-issued ID for various applications.
4. Ensures proper tax collection by linking all transactions.
5. Required for bank account opening, mutual funds, property purchases, and more.

Key Takeaways

1. The government now provides instant PAN allotment based on Aadhaar for faster processing.
2. E-PANs are now accepted as valid proof for financial transactions and government applications.
3. Banks and institutions now use online systems for instant PAN verification.