Any citizen of India, as well as NRI (Non-Resident Indians), OCI (Overseas Citizen of India) cardholders, PIO’s (Person of Indian Origin) as well as foreigners hold the eligibility to apply for a PAN Card. Firms, Companies, Governments, and Minors too are eligible to apply for a PAN card.
PAN(Permanent Account Number) is an indispensable part of identity today for an individual. Transactions involving more than 50,000 need to be quoted compulsorily. It is an important tool, issued by the Income Tax Department(ITD) to keep a tab on all the financial transactions of the individual and unearth any income leaks from the ITR filed by him, which is effective in reducing tax evasion.
It is recommended to have a PAN number even if the income does not fall under the taxable brackets. For any financial transactions like receiving salary, sale or purchase of assets above specified limits, converting Indian Rupees to foreign currency or investing in the stock market, PAN number is mandatorily required. Also for businesses having a turnover exceeding 5lakh, the PAN number is a must.
The ten-digit alpha-numeric number(PAN) issued by the Income Tax Department is in ways more useful than only being limited to undertaking financial transactions. Let’s have a look at the key usages of the PAN card in detail below.
1. Identity Proof- For an individual of the country, other than Voter Card, Aadhar Card, PAN card serves as a valid identity proof. It is accepted by all financial institutions and other organizations as an identity proof.
2. Tax Filings- For filing of IT returns is one of the primary reason individuals and firms apply for the PAN number. An individual is required to link his/her bank account with the PAN number. Failing to link the account will permit the bank to deduct 30% TDS instead of 10% if the annual interest earnings on savings deposits exceed Rs. 10,000/-.
3. To Claim returns from the IT department- To deposit an amount of Rs 50,000 or above in the bank, one will have to furnish the PAN details. The bank will otherwise deduct the TDS(Tax Deductible at Source) on the FD interest amount.
4. Depositing Cash- Any cash deposited above Rs 50,000 at a time, will demand the submission of PAN details. To prevent money laundering and any other illegal transfer of money, banks are directed by RBI to report large cash deposits. Even for making bank drafts, pay orders, banker’s cheques, it is mandatory to furnish PAN details.
5. To open a Bank Account- These days it has become mandatory to have a PAN card to open a bank account, except in case of zero balance account under Prime Minister Jan Dhan Yojna, whose prerequisites don’t include having a PAN card for proof of identity. PAN card is also mandatory to open a Demat account or dematerialized account which holds all shares in the electronic format of an individual.
6. For Investments- If an individual is planning to buy or selling securities over and above Rs 1 lakh or to invest in ELSS fund of an amount worth 50,000 or more, it becomes mandatory to provide for PAN details.
7. Currency Exchange- It is mandatory to carry a PAN card if an individual is traveling abroad and in exchanging Indian currency with the foreign ones. One will have to furnish the PAN details at the bank/exchange bureau/ or any institution converting the money. An individual traveling overseas will have to provide the PAN details if he/she spends more than 25000 in a day. PAN number is thus a very important document. All transactions involving foreign currency comes under capital or current account transaction.
8. Applying for a debit and credit card – If one plans to apply for debit or credit card, it is necessary to provide the PAN details. Non-submission will result in rejection of the application of the card, which in turn which harms the credit score. It can create a problem while availing of the loan in the future.
9. For sale /purchase of immovable property – Furnishing of PAN details is mandatory if one is purchasing or selling property worth more than Rs 10lakh.
10. To start a Business – As per the Income Tax act 1961, which was implemented in 2010, if one is planning to start a business of his/her own, it is mandatory to have a PAN registered in the name of the entity. TRN is also mandatory also for the company whoever is paying the entity, planning to launch their business. For businesses to get registered TRN(Tax Registration Number) can be obtained only if the entity has PAN details.
11. An individual planning to buy or sell a four-wheeler will have to provide for PAN details. It is also required to furnish when an individual is going to avail an auto loan. As of now, PAN details are not mandatory to purchase second-hand cars. Instead of PAN, one can use Form 60. But in the near future, the rules are about to change. So it is important, one should keep records in place.
After looking at the above-mentioned descriptions, it is clear that PAN card is a very important document to gain access to many services in our day to day transactions. So if you have not applied for the one, go ahead and apply fast.