PAN and TAN No.

PAN stands for Permanent Account Number. PAN is a ten-digit unique alphanumeric number issued by the Income Tax Department. PAN is issued in the form of a laminated plastic card (commonly known as PAN card). Given below is an illustrative PAN: ALWPG5809L

Benefits for obtaining PAN

A Permanent Account Number has been made compulsory for every transaction with the Income-tax Department. It is also mandatory for numerous other financial transactions such as opening of bank accounts, in bank account, deposit of cash in bank account, opening of Demat account, transaction of immovable properties, dealing in securities, etc. A PAN card is a valuable means of photo identification accepted by all Government and non-Government institutions in the country.

Formation of PAN and Its unique identity

PAN is a ten-digit unique alphanumeric number issued by the Income Tax Department. The formation of PAN is discussed below : Out of the first five characters, the first three characters represent the alphabetic series running from AAA to ZZZ. (g.ALWPG5809L). The fourth character of PAN represents the status of the PAN holder (g.ALWPG5809L).
“A” stands for Association of Persons (AoP)
“B” stands for Body of Individuals (BOI)
“C” stands for Company
“F” stands for Firm/Limited Liability Partnership
“G” stands for Government Agency
“H” stands for Hindu Undivided Family (HUF)
“J” stands for Artificial Juridical Person
“L” stands for Local Authority
“P” stands for Individual
“T” stands for Trust
Fifth character of PAN represents the first character of the PAN holder’s last name/surname in case of an individual. In case of non-individual PAN holders fifth character represents the first character of PAN holder’s name (g.ALWPG5809L) Next four characters are sequential numbers running from 0001 to 9999 (g. ALWPG5809L). Last character, e., the tenth character is an alphabetic check digit (E.g. ALWPG5809L). The combination of all the above items gives the PAN its unique identity.

Who require PAN:

PAN is to be obtained by following persons:
*Every person if his total income or the total income of any other person in respect of which he is assessable during the previous year exceeds the maximum amount which is not chargeable to tax.

*A charitable trust who is required to furnish return under Section 139(4A)

*Every person who is carrying on any business or profession whose total sale, turnover, or gross receipts are or is likely to exceed five lakh rupees in any previous year

*Every person who intends to enter into specified financial transactions in which quoting of PAN is mandatory

*Every non-individual resident persons and person associated with them if the financial transaction entered into by such non-individual resident persons during a financial year exceeds Rs. 2,50,000.

Note: Persons associated with non-individual resident persons means the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of the non-individual resident persons or any person competent to act on behalf of such persons.

A person not covered in any of the above can voluntarily apply for PAN.

Specifit Transactions reuiring PAN

As per rule 114B, following are the transactions in which quoting of PAN is mandatory by every person except the Central Government, the State Governments and the Consular Offices:
1. Sale or purchase of a motor vehicle or vehicle other than two wheeled vehicles.
2. Opening an account [other than a time-deposit referred at point No. 12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank
3. Making an application for issue of a credit or debit card.
4. Opening of a demat account with a depository, participant, custodian of securities or any other person with SEBI
5. Payment in cash of an amount exceeding Rs. 50,000 to a hotel or restaurant against bill at any one time.
6. Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
7. Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its units
8. Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring debentures or bonds issued by it.
9. Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds issued by it.
10. Deposit with a banking company or a co-operative bank:-
i. Cash exceeding Rs. 50,000 during any one day; or
ii. Cash deposit of aggregating to more than Rs. 2,50,000 during the period 09th November, 2016 to 30th December, 2016
11. 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.
12. A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with –
i. a banking company or a co-operative bank
ii. a Post Office;
iii. a Nidhi referred to in section 406 of the Companies Act, 2013 or
iv. a non-banking financial company
13. 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.
14. Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer
15. A contract for sale or purchase of securities (other than shares) for amount exceeding Rs. 1 lakh per transaction
16. Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange for amount exceeding Rs. 1 lakh per transaction.
17. 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.
18. Sale or purchase of goods or services of any nature other than those specified above for an amount exceeding Rs. 2 lakh per transaction.
NOTE:
1. Minor person can quote PAN of his father or mother or guardian provided he does not have any income chargeable to income-tax.
2. Any person, who does not have PAN and enters into any of above transaction, can make a declaration in Form No.60.
3. Quoting of PAN is not required by a non-resident in a transaction referred at point No.3 or 5 or 6 or 9 or 11 or 13 or 18.
Q.7 How does Income Tax Department ensure that PAN is quoted on transactions in which quoting of PAN is mandatory?