PAN (Permanent Account Number) –What does it tell ?

PAN or Permanent Account Number is unique alphanumeric combination provided to entities which are identifiable under the Income Tax Act, 1961.The basic purpose of assigning this number to an entity is to track down substantial flow of monetary resource to and fro through such an entity via this number. Hence, assigning this number and making its role mandatory in major financial transactions ensures that evasion of tax is checked. PAN also serves as an important Id proof document. PAN; as acronym depicts is “Permanent” and is unique to every entity. PAN is allocated to variety of “entities”, viz. Company, Individuals, HUF, Trusts, Societies, AOPs etc. Structure of a PAN Card is given below:

Permanent Account Number is framed in such a manner that it reveals some details about its holder, suppose the PAN is AAAAA9999A; Then,

• The fourth Letter in PAN tells us about the type of Assesse :
• A – AOP
• B – BOI
• C – Company
• F – Firm
• G – Government
• H – HUF
• J – Artificial Judicial Person
• L – Local Authority
• P – Person
• T – Trust
• Fifth letter of Permanent Account Number is :
• First character of Surname in case of Person
• First character of name for assesses other than a Person(Individual)

• Next four characters “9999” in this case, are numbers ranging from 0001 to 9999 

• Last letter is “Alphabetic Check Digit”

Importance of PAN -

It is mandatory to quote PAN on return of income, all correspondence with any
income tax authority. From 1 January 2005 it will be mandatory to quote PAN on
chaalans for any payments due to Income Tax Department. It is also compulsory to quote PAN in all documents pertaining to the following financial transactions -

• Sale or Purchase of any Immovable Property valued at five lakh rupees or more;
• Sale or Purchase of a motor vehicle or vehicle, [the sale or purchase of a motor vehicle or vehicle does not include two wheeled vehicles, inclusive of any detachable side-car having an extra wheel, attached to the motor vehicle]
• A time deposit, exceeding fifty thousand rupees, with a banking company ;
• A deposit, exceeding fifty thousand rupees, in any account with Post Office Savings Bank;
• A contract of a value exceeding one lakh rupees for sale or purchase of securities;
• Opening a bank account;
• Making an application for installation of a telephone connection (including a cellular telephone connection);
• Payment to hotels and restaurants against their bills for an amount exceeding twenty-five thousand rupees at any one time ;
• Payment in cash for purchase of bank drafts or pay orders or banker’s cheques for an amount aggregating fifty thousand rupees or more during any one day;
• deposit in cash aggregating fifty thousand rupees or more with a bank during any one day;
• payment in cash in connection with travel to any foreign country of an amount exceeding twenty-five thousand rupees at any one time.

SEBI with effect from April 1, 2006 has made PAN card compulsory for opening a Demat account