Permanent Account Number (PAN) is a 10-digit code with alpha-numeric values that works as unique authentication for the users. It is essential for every Indian individual and entity that earns taxable income.
But the uses of a PAN card are not limited by taxation. It offers multiple other advantages. Read on to learn about them in detail.
Key uses and advantages of PAN card
1. Income Tax Returns (ITR)
When it comes to ITR, a PAN card offers the following uses.
- Filing ITR: Every Indian, living in the country or abroad, needs PAN to submit their income tax returns.
- Tax refund: If your Tax Deducted at Source (TDS) is higher than your overall tax liability, it is possible to claim a refund. But, to receive the money in your bank account, your PAN must be linked with the account.
- Reducing TDS: You can save or reduce TDS by quoting your PAN to various accounts. For example, banks charge you a 10% TDS if you make over ₹10,000 as interest income from a savings account linked to your PAN. But, if your PAN and the account are not linked, a 30% TDS is charged on the interest earned.
2. Opening various accounts
One of the most significant benefits of a PAN card is its requirement for opening different types of accounts. The list includes the following.
- Bank account: You cannot open any bank account in India without providing a PAN card. The only exception is a savings account under the Pradhan Mantri Jan Dhan Yojana.
- Non-Resident Ordinary (NRO) account: If Non-Resident Indians (NRIs) want to open a rupee-denominated NRO account to keep any income received from India, they will need to provide PAN details.
- Demat account: If you want to invest money in Exchange-Traded Funds (ETFs), bonds, shares, and other financial securities, you need to open a Dematerialization (Demat) account. Submitting your PAN card details is mandatory to open this account.
3. Making transactions over ₹50,000
In some cases, making a transaction over ₹50,000 requires the submission of a PAN card. Below is a list of some examples:
- Bank account deposit: When depositing more than ₹50,000 in any bank account, it is compulsory to provide PAN card details.
- Restaurant and hotel bills: If you are paying over ₹50,000 in cash towards a restaurant and hotel bill, you need to provide your PAN card.
- Banker’s check and demand drafts: PAN details are necessary for issuing any banker’s check, demand draft, or pay orders exceeding ₹50,000.
- Travel-related cash payments: If you are purchasing foreign currency, buying flight tickets, paying a travel agency, or making any other cash transaction over ₹50,000 for travel purposes, you need to furnish the PAN details.
- Buying debentures, bonds, and mutual funds: If you spend more than ₹50,000 in a year to purchase debentures, bonds, or mutual funds, submitting the PAN card is necessary.
- Payments made to pre-paid options: Any payment over ₹50,000 to gift cards, cash cards, or e-wallets within a financial year requires you to furnish PAN details.
- Life insurance policy premium: If the yearly premium for your life insurance policy is more than ₹50,000, it is mandatory to provide your PAN details.
4. Buying and selling
The importance of a PAN card is not limited to only the above transactions; you need it to buy and sell specific services or products as well. These are as follows:
- Any immovable asset and property valued over ₹10 lakhs.
- Services and goods that cost more than ₹2 lakhs.
- Securities priced over ₹1 lakhs.
- Any vehicle excluding two-wheelers.
- Bullion and gold valued over ₹5 lakhs.
5. Registration of a business
Registering a new business requires the acquisition of a Tax Registration Number (TRN). To get the TRN, you must submit the PAN card details of the company and its lawful owners.
6. Foreign transaction
Many types of foreign transactions require your PAN details, irrespective of the amount of transaction. Some examples are as follows:
- Transferring money from a Non-Resident External (NRE) account to an NRO account
- Sending money to another country from India
7. Identity proof
Apart from all the uses mentioned above, you can also use a PAN card as valid ID proof.
Importance of PAN for Income Tax Authority
Direct tax paid by Indian individuals and organizations accounts for over 50% of the country’s total tax revenue. The government uses this money to develop India’s infrastructure and for the betterment of the citizens.
One of the biggest challenges to this process is tax evasion, as only a small percentage of Indians pay regular taxes. This is why the Income Tax Authority of India provides PAN cards to taxpayers to track any taxable transaction made by them.
Therefore, if you are a PAN cardholder, the government will always know your tax liability.
Who can hold a PAN card?
Before applying for it, you need to check the PAN card eligibility criteria. To get the card, you have to be a:
- Indian resident
- Person of Indian Origin (PIO)
- Foreigner earning money in India
- Overseas Citizenship of India (OCI) cardholder
Other than individuals, PAN cards are given to entities such as:
- Hindu Undivided Family (HUF)
- Association of Persons
- Artificial Judicial Person
- Local authorities
- Foreign companies earning in India
Moreover, minors in the country can apply for a PAN card by submitting the form signed by their parents or legal guardians.
Linking your PAN with Aadhaar
Until a few years ago, the use of duplicate PAN cards had become a severe issue in India. So, the Aadhaar link with the PAN card was made mandatory by the government during the Union Budget 2017. As per the rules directed by the Government of India, if you do not link your Aadhaar and PAN cards, the latter will become ‘inoperative’, and you will not be able to submit it for any official purpose. In case of uncooperative PAN card submission, the government can penalize you.
To enjoy the advantages of a PAN card, you must apply for it today. You can do it online in a few easy steps and get it delivered to your address within some days.
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