Permanent Account Number (PAN)
Introduction
PAN is a ten-digit alphanumeric identifier issued by the Income-tax Department to identify taxpayers uniquely. It is mandatory for income-tax filings, high-value financial transactions, and correspondence with the tax authorities. Aadhaar can be used in lieu of PAN.
How to obtain PAN
- A resident applies for PAN inForm 49A, while a foreign citizen applies inForm 49AA.
- For company incorporation, PAN is allotted through Part B of the SPICe+ form
- For LLP incorporation, PAN can be applied through Form FiLLiP.
Who Should Obtain PAN?
- Individuals with taxable income exceeding the exemption limit.
- Businesses or professionals with gross receipts exceeding Rs. 5 lakh.
- Every person receiving income from property held under trust or legal obligation, wholly or partly for charitable or religious purposes, and liable to be assessed as a representative assesse in respect of such income.
- Entities conducting financial transactions of Rs. 2.5 lakh or more annually.
- Any person acting as MD, director, partner, trustee, author, founder, Karta, CEO, principal officer, office bearer
- Authorised representative of an entity with financial transactions of Rs. 2.5 lakhs or more in a year.
- Persons entitled to receive any sum subject to TDS/TCS.
- Persons depositing or withdrawing cash of Rs. 20 lakh or more annually.
- Persons opening current or cash credit accounts (exceptions for non-residents under specific conditions).
- Any other persons notified by the Central Govt..
Mandatory Quoting of PAN
Quoting of PAN is mandatory in the following circumstances:
o If receipts/payments are subject to TDS/TCS;
o In all returns, challan or income-tax correspondence
o In certain financial transactions such as:
o Sale or purchase of a motor vehicle (other than two-wheelers)
o Opening an account [other than a basic savings bank deposit account] with a bank or a co-op. bank
o Time deposits with banks, co-op banks, post offices, Nidhis, or NBFCs exceeding Rs. 50,000 per transaction or Rs. 5 lakh in a year.
o Making an application for issue of a credit or debit card;
o Opening of a Demat account and more…
Interchangeability with Aadhaar
- If a person has Aadhaar but no PAN, quoting Aadhaar in specified transactions is treated as an application for PAN, with no separate documents required.
- If a person has PAN linked with Aadhaar (Sec. 139AA), Aadhaar can be quoted in place of PAN for all transactions where PAN is mandatory.
Exemptions from Quoting PAN
- Minor may quote PAN of parent/guardian if he has no taxable income.
- Form 60Declarations: The form allowed for individuals (not companies/firms) who do not have PAN. Form 60 is furnished for specified financial transactions.
- A foreign company may submit Form instead of PAN if:
- a) It has no income chargeable to tax in India;
- b) It does not have PAN;
- c) The transaction is in an IFSC banking unit; and
- d) The transaction relates to opening an account or time deposit
o As per Rule 114AB, a non-resident, not being a company or a foreign company, shall not be required to obtain and quote PAN if the specified conditions are satisfied.
Consequences of Non-Compliance of PAN
- Penalty underSection 272Bfor failure to obtain or quote PAN.
- Having Multiple PANs: Attracts penalty undersection 272B
- Rs. 10,000 penalty for quoting false PAN or failure to quote PAN or failure to authenticate it.
- Higher TDS/TCS rates apply if PAN is not quoted (Sections 206AAand206CC).