A PAN card is a very crucial document for every Indian. Nowadays, it is not only used for tracking taxpayers but also some of the most important day to day transactions. It is also needed on every investment platform. Hence, it is imperative to know where and how PAN is used.
PAN is used for the following purposes:
● Identity proof: A PAN card is widely accepted as a valid identification proof. It is a trusted identification document for all financial institutions and other organizations.
● IT Return filing: All individuals who are eligible to pay income tax should file their IT returns. For filing IT returns, one should have the PAN card. It is a compulsory document for filing IT returns.
● Opening a bank account: All the co-operative, public and private banks have made it mandatory for an individual to have a permanent account number (PAN) in order to open a savings or a current account.
(Note: Under Pradhan Mantri Jan Dhan Yojana, a person can open a bank account on the basis of other documents, such as Voter ID card and Aadhaar card)
Benefits of PAN Card
● Purchase and sale of property:
One of the best benefits of PAN card is that it is accepted in formalities involved during buying or selling immovable assets. A PAN card is mandatory for a transaction valued Rs. 10 lakhs or more.
● To claim income tax refund:
○ Many times, a taxpayer needs to pay more than the actual tax amount. To get the refund, the individual needs to link his/her PAN card to the bank account.
● For Startups:
○ In order to start a business or a company, it is mandatory to have a PAN card in the name of the organization.
● Tax deduction:
○ A PAN card is very important for taxation. If an individual who is receiving Rs. 10,000 in the form of interest from either a savings account or an FD and has not linked his PAN card with the bank account, then the bank will debit 20% of TDS instead of 10%.
● For Banker’s cheque and Pay order:
○ A PAN card is essential while requesting for a pay order, bank cheques and drafts. If an individual is transacting more than Rs. 50,000 then he/she will need the PAN card to complete the transaction.
● Restaurant and hotel bills:
○ If your hotel or restaurant bill exceeds Rs. 50,000 then for paying the bill you will need a PAN card.
● To open a demat account:
○ An individual should possess a PAN card to open a demat account, which is used to hold shares in the dematerialized form.
● For taxation:
○ A PAN card helps the Income Tax Department to assess an individual or entity’s monetary transactions. It helps in identifying persons involved in tax evasion. The PAN card has the name, photograph and other related information that even make it a valid identity proof.
● Low misuse chances:
○ The possibility of PAN card misuse is minimal. Notably, a PAN card will not change even if it is lost or stolen.
● For tax evaluation:
○ A PAN card is a tool that evaluates total tax revenue in India.
● Easy accessibility:
○ A minor can also avail a PAN card by providing his/her guardian’s PAN details.
Besides all the PAN card advantages, linking PAN with the Aadhaar card also brings some additional perks. Notably, it is compulsory to link PAN card with Aadhaar card if an individual has the latter. This will help the government to detect duplicate PAN under one name. Linking both is also mandatory for paying taxes.