If you've applied for a financial instrument or anywhere requiring you to submit proof of identity, you may have noticed that you can present a PAN card. After all, it contains your name, date of birth, father’s name, PAN, photograph and signature, all the details that can help identify you as an individual.
But what is a PAN card really used for? What are the eligibility requirements and the advantages of getting one? If you’re looking for answers to these questions, read this blog.
What is a PAN card?
A PAN card (Permanent Account Number card) is a ten-digit alphanumeric code that is your permanent identification number assigned by the Indian Income Tax Department to store an individual’s tax information. This is why it is unique to you.
Note that, unlike other forms of identification, the PAN card is valid for a lifetime once issued. That said, minors must convert their cards to permanent ones with their photo and signature once they turn eighteen.
What are the details included in a PAN card?
1. Cardholder name
2. Cardholder’s father’s name (applicable to individuals)
3. The 10-digit alphanumeric permanent account number
4. Cardholder signature
5. Cardholder date of birth (in case of individuals)/ date of registration (in case of organisation)
6. Cardholder photograph (for individuals)
7. Government of India hologram and the tag of the Income Tax department
8. Taxpayers category details
What is the format of the 10-character alphanumeric PAN? A
The alphanumeric PAN consists of three random letters, a letter indicating the taxpayer’s category, the initial of the individual’s surname, four random numerals and an alphabet.
Here’s a breakdown of the various categories of taxpayers and their corresponding letters for your reference.
A - Association of Persons
B - Body of Individuals
C - Company
F - Firms
G - Government
H - Hindu Undivided Family
L - Local Authority
J - Artificial Judicial Person
P - Individual
T - Association of Persons for a Trust
Importance of a PAN card
The PAN (Permanent Account Number) was introduced in 1972, replacing the prevalent General Index Register (GIR) number to identify taxpayers. It replaced the manual system confined to the Assessing Officer's Ward, essentially ensuring any taxpayer could be identified nationally and possessed a unique identity.
The PAN card was made mandatory for tax-paying individuals in 1976 and has since been issued countrywide, facilitating financial transactions, helping prevent tax evasion, and simplifying the KYC process.
Here are some more uses of a PAN card you should know about.
What is the use of a PAN card?
1. Filing income tax returns
You need to enter your PAN details when filing Income Tax returns. Doing this allows the Income Tax department to identify that you have paid the taxes and record them.
2. Valid identity proof
Since your PAN card contains your personal details and is verified by the Government, it serves as a valid identity proof alongside voter cards and Aadhaar cards, for various purposes.
3. Claiming tax refunds
Since the PAN card helps the Income Tax department access the record of your tax payments, you can claim tax refunds easily using your PAN card. Note, your PAN card should be connected to your financial institution account, and you can claim a refund of the excess tax paid when the TDS (Tax Deducted at Source) deducted from your income exceeds your actual tax liability.
4. Business registration
Starting a business or establishing an entity requires mandatory registration of a PAN card in the entity's name. A TRN (Tax Registration Number) is essential for business operations and can only be obtained if your entity possesses a PAN card.
5. Making investments
When investing in stocks, mutual funds, bonds, or debentures, having a PAN card becomes crucial. This requirement ensures transparency and helps track investment activities, providing a secure environment for investors.
Now that we know the different PAN card uses, let’s take a look at their eligibility criteria.
Eligibility criteria for PAN card application
1. A person having Indian citizenship can apply for a PAN card, provided they have a valid address in India.
2. Hindu Undivided Families (HUFs) are eligible for PAN cards as separate entities with joint family members.
3. There’s no cap on the PAN card eligibility age. Parents can apply for PAN cards on behalf of their minors. However, they must update their photo and signature upon turning 18 years of age.
4. Registered companies, partnership firms, LLPs (Limited Liability Partnerships), and other business entities must obtain PAN cards for their operations.
5. Trusts and charitable organisations engaged in financial transactions or receiving taxable income require PAN cards.
6. Non-Resident Indians (NRI) who earn taxable income in India or wish to engage in financial transactions requiring a PAN are eligible to apply.
7. Overseas Citizens of India (OCI) cardholders, who are considered overseas citizens with roots in India, are eligible for PAN cards.
8. Persons of Indian Origin (PIO), who have foreign citizenship but can prove their Indian origin, are eligible for PAN cards.
9. Local authorities can also apply for PAN cards.
How to apply for a PAN card online via the National Securities Depository Limited website?
1. Visit the official NSDL (National Securities Depository Limited) website.
2. Now select the application type and choose your category.
3. Fill out the PAN application form by accurately providing your details, and click 'Submit'.
4. You will now receive an acknowledgement number to check your application status.
5. Click on 'Continue with PAN Application form' and fill in all the required details.
6. Decide how you want to submit the documents. You can submit the documents physically, digitally through a digital signature or digitally via e-sign.
7. Select 'Proceed' to continue using your preferred payment mode.
8. You will receive an acknowledgement receipt if you choose to pay via debit card or net banking, whereas you will have to enter the details of the demand draft if you choose to pay via this mode while filling out the application.
9. Submit two recent photographs, the acknowledgement receipt and the supporting documents to NSDL.
The PAN card is a unique identification document that ensures income tax compliance, facilitates various financial transactions, and can also be used as identity proof. This makes it an important document, especially if you’re a taxpayer beginning your financial journey today.
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04 July 2023
6 mins read
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