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What is PAN Card, PAN Number, Uses and Benefits

21-JUN-2017 10:06

    PAN Card is a Permanent Account Number consisting of 10-digit alphanumeric number, which is used as an identity proof and issued under the Indian Income Tax Act, 1961 in the form of a laminated card in India. PAN Card is issued by the Indian Income Tax Department under the supervision of the Central Board for Direct Taxes (CBDT). It is also issued to foreign nationals like investors as a subject to a valid visa unlike Aadhaar Number and Driving License but it is not acceptable as a proof of Indian citizenship. The PAN number is important for major financial transactions like opening a bank account, receiving taxable salary, sale or purchase of assets etc. That is why it provides details of the account holder in a unique way.



    Do you know that these numbers and letters have any meaning or not, what do they stand for and how the combination is unique?

    Classification of characters in PAN Card

    10 characters of PAN card is divided into five parts. The first five figures of the representation are alphabets, the next four digits are numbers and the last number is again an alp0habet. All these digits have a meaning and reveal the information of the account holder. The meaning of each number has been explained below:

    First three Characters (1):


    The first three characters are normal alphabetic series starting from AAA to ZZZ. The I.T. Department allocates the digits randomly and is a combination of the letters such as AZT or ZRT.

    Fourth Character (2):


    The fourth character represents the status of the PAN card holder. It is one of the most important character and those who deals in PAN card usually look at this character to identify the status of that particular person. The fourth character for a majority of PAN holders is the letter “P”, which stands for “person”. The other nine letters that can represent the fourth character are C, H, F, A, T, B, L, J, and G.

    These letters stands for:

    C – Company

    H – Hindu Undivided Family

    F – Firm

    A – Association of Persons

    T – Trust

    B – Body of Individuals

    L – Local Authority

    J – Artificial Juridical Person

    G – Government

    Taxation in India: An Overview

    Fifth Character (3):


    The fifth character represents the first alphabet of PAN holder’s last name or surname. Like someone has Amit Goyal name then G as the fifth character on his PAN card as his last name’s first alphabet is G. Also, if your surname changes after marriage or due to any other reason, then also your PAN card number will remain unchanged.

    Sixth to Ninth characters (4):


    These four characters are sequential numbers starting from 0001 to 9999. Also like first three characters, here too the selection is random.

    Tenth Character (5):


    The last or Tenth character in the PAN card is an alphabetic check digit which is the result of the calculation based on a formula that accommodates all the nine characters.

    Have you thought that why this classification is important?

    With the help of this unique number (PAN Number) income-tax department can link all the transactions of the person with the department. These transactions include tax payments, tax deducted at source/tax collected at source credits, returns of income/wealth/gift, specified transactions and so on. Therefore we can say that PAN card acts as a universal identification key to track financial transactions that might have a taxable component to prevent tax evasion. It also remains unaffected by change of address throughout India.

    Who should apply for PAN Card?

    Those who earns taxable income in India including foreign nationals who pay taxes. Also, persons who are running business may be of retail, services or consultancy and total sales, turnover or gross receipt is exceeding Rs 5 lakhs in the previous financial year.

    Components of Indian Financial System

    After knowing the details of PAN Card now, it is important to know how we can apply for PAN Card.

    1. For this, use ‘Form 49 A’ or ‘Form 49AA’ as applicable to you and for more details visit incometaxindia.gov.in. From the websites of Income Tax Department or National Securities Depository Limited (NSDL) you can find the location of PAN Card offices in any city. Also photocopy of identity card and address proof is required. And payment can be made via cheque, cash or DD.



    2. Online also you can apply through the websites of the I-T Department or NSDL. Fee can be paid via net banking, credit card or debit card. And you can even track your application online.



    Why there is a need of PAN Card?

    PAN Card is necessary to file income tax returns, for the payment of direct taxes, to avoid deduction of tax at higher rate and also some provisions are there to enter in to specific transaction like sale or purchase of immovable property of Rs 5 lakh or more, Sale or Purchase of a vehicle other than a two wheeler, Payment to hotels or restaurants of amount exceeding Rs 25,000 at one time, deposit exceeding Rs 50,000 with any single banking institution in 24 hours, Payment exceeding Rs 5 lakh for purchase of bullion and jewellery etc.

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    DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.

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