What is a PAN?
Permanent Account Number abbreviated as PAN is a unique 10-digit alphanumeric number issued by the Income Tax Department to Indian taxpayers.
The department records all tax-related transactions and information of an individual against his unique permanent account number. This allows the taxman to link all tax-related activities with the department.
PAN primarily acts as a database for all individual transactions, such as the tax collected at source (TCS)/tax deducted at source (TDS) credits, income tax payments, return on gift/investments/wealth, etc. Simply put, the PAN enables the tax department to identify an individual’s tax-related transaction.
PAN Card
The tax department issues an individual’s PAN on a physical card referred to as the PAN card. The PAN card includes information, such as the PAN number, photograph, name, and date of birth of the holder.
PAN has a typical format of ABCTY1234D. The first three characters, i.e. ‘ABC’ in the above number is an alphabetic series ranging between AAA and ZZZ. The 4th character, i.e. ‘T’, represents the PAN holder’s status. The alphabet ‘T’ represents Trust, ‘F’ for Firm, ‘H’ for HUF, ‘P’ for Individual, ‘C’ for Company etc. The 5th character, i.e. ‘Y’, represents the first alphabet the PAN holder’s last name. The next four characters are sequential digits ranging between 0001 and 9999. The 10th character, i.e. ‘D’, is an alphabetic check digit that runs from A to Z.
Is PAN Mandatory?
The Income Tax Department has mandated the use of PAN on the return of income on all tax-related transactions. PAN is an integral aspect when it comes to tracking the transactions and monitoring the inflow and outflow of an individual’s money.
Also, the government has mandated the linking of PAN with Aadhaar. The deadline for linking of PAN with Aadhaar is 31 March 2020. In the same line, the Finance Minister, in the Union Budget 2020, proposed to instantly allot PAN to individuals on the basis of their Aadhaar.
