Why is PAN important?
A PAN card is a document that no taxpayer can do without. Besides being compulsory in order to file your Income Tax returns and to receive a tax refund, a PAN card also serves an accepted proof of identity and has now been made mandatory for a number of transactions of both a business as well as a personal nature. A comprehensive list of the various activities that require a PAN card to complete or authenticate the activity are mentioned below:
Mandatory uses of PAN
- PAN needs to be quoted while paying direct taxes
- While registering a business, PAN information needs to be mandatorily furnished
- Taxpayers need to input their PAN when paying income tax
- A lot of financial transactions require PAN information. Some of these transactions are:
- Sale or purchase of property (immovable) which is valued at Rs.5 lakh or above
- Sale or purchase of a vehicle except a two-wheeler
- Payments that are made towards hotels and restaurants and which are above Rs.25,000
- Payments made in connection with travel requirements to other countries. The amount in this case if it exceeds Rs.25,000, then an individual needs to quote his/her PAN
- Making payments of more than Rs.50,000 towards bank deposits in a bank
- Acquiring bonds by paying an amount equal to or greater than Rs.50,000
- Payments made for more than Rs.5 lakhs towards purchase of jewellery and bullion also require PAN information of the purchaser to be furnished
- Any purchase of mutual fund schemes
- Any amount greater than Rs,50,000 used towards purchasing shares
- Any payment of more than Rs.50,000 made towards acquiring an insurance policy needs PAN information of the policyholder
- To Remit money out of India
- Pan information is required for transfer of funds from NRE to NRO account
General uses/advantages of PAN
- Since PAN card contains information like Name, Age and photograph, it can be used throughout the country as a valid identity proof
- PAN is the best possible way to keep track of your tax payment. Otherwise, you might be required to pay it multiples times since your tax payment cannot be verified
- Since, PAN is unique for every entity and hence, misuse of the same is almost impossible for purposes of tax evasion etc.
- PAN card can be used as a document that is required to avail connections like electricity, telephone, LPG and internet.
- PAN is a unique identification number assigned to taxpayers and hence it is used to track all financial information like payment of taxes, investments made and debt liability of an entity, to a single customer.
Concepts Similar to PAN Card
The concept of a PAN card, or a unique number assigned to every tax paying entity is not a new concept. In fact, there are a number of similar such utilities that are used for tax purposes.
TAN (Tax Deduction and Collection Account Number) - This is a unique 10 digit number that is issued to individuals and entities who have to collect or deduct tax on payments they made as part of tax Deducted at Source (TDS) under the Income Tax Act.
The TAN has to be quoted when applying for TDS or Tax Collected at Source (TCS) challans made to disburse the refund as well as on certificates. Failure to quote the TAN would result in a fine of Rs. 10, 000.
TIN (Taxpayer Identification Number) - A TIN number is a unique 11 digit number that is used to identify dealers who are registered under the Value Added Tax. Allotted by individual states, it is compulsory for all manufacturers, traders and dealers to register for a TIN number. This number is to be quoted when generating invoices, orders or quotations by both the issuing as well as the receiving company.
It is also used to identify assesses under the Income tax Act of 1961.