What is PAN?
PAN stands for Permanent Account Number. It is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any “person” who applies for it or to whom the department allots the number without an application. Person means Individuals, Companies, Firms, Hindu Undivided Family (HUF) and Trust etc. It’s a unique identification code through which all the monetary transactions are tracked.
PAN enables the Income Tax Department to link all transactions of the “person” with the department. Thus, it helps in tracking monetary transactions. These transactions include tax payments, TDS/TCS credits, returns of income/wealth/gift/FBT, specified transactions, correspondence, and so on. PAN, thus, acts as an identifier for the “person” with the tax department.
Format of PAN:
A typical PAN is AFZPK7190K.
- First three characters i.e. “AFZ” in the above PAN are alphabetic series running from AAA to ZZZ.
- The fourth character of PAN i.e. “P” in the above PAN represents the status of the PAN holder.
“P” stands for Individual Person, “F” stands for Firm, “C” stands for Company, “H” stands for Hindu Undivided Family (HUF), “A” stands for Association of Persons (AOP), “T” stands for TRUST etc.
- The fifth character i.e. “K” in the above PAN represents first character of the PAN holder’s last name/surname.
- Next four characters i.e. “7190” in the above PAN are sequential number running from 0001 to 9999.
- Last character i.e. “K” in the above PAN is an alphabetic check digit.
The legal authority for issuing, allotment and use of the new series of PAN is envisaged under Section 139A of the Income-tax Act, 1961.
Section 139A of the Income Tax Act, 1961 lays down the framework for PAN. This section specifies who is required to apply for PAN, who else can apply for PAN, who will allot PAN, transactions where PAN is required to be quoted, use of PAN in TDS certificates and TDS returns, that one person can have only one PAN and the manner of applying for PAN.
The manner of applying for PAN is laid down in Rule 114 of the Income-tax Rules, 1962. This rule also specifies the copies of documents required to be submitted along with the PAN application as proof of identity and address of the PAN applicant.
Forms 49A or 49AA, as the case may be, are required to be filed for allotment of PAN. Form 49A is required to be filed for allotment of PAN to citizens of India and Form 49AA is required in the case of allotment of PAN to Foreign citizens and entities incorporated outside India.