PAN or Permanent Account Number is the unique code that identifies an Indian National. PAN is a 10 digit unique alpha-numeric code issued under Income Tax Act 1961. It is a misconception that if i am not paying income tax then i don’t need PAN. Just to clarify that Permanent Account Number or PAN is mandatory for specified transactions. It is mandatory for each and every individual, company, Minor, NRI, the taxpayer, non-taxpayer, senior citizen etc to obtain and quote PAN for these transactions. There are only three exceptions to this rule i.e. the central government, the state government and the consular offices.
In layman terms, As an individual, you don’t need permanent account number if you fulfill following 3 conditions.
(a) Your income including income because of “clubbing of income” provisions is less than basic exemption limit.
(b) You don’t intend to enter into any transaction where it is mandatory to quote permanent account number.
(c) You don’t receive any sum/income after TDS deduction.
Another misconception is that permanent account number certify that an individual is Resident Indian or Citizen of India. It is not correct. Normally, NRI sellers mislead the property buyers that they have a permanent account number. Therefore, they are resident Indian. It is not correct and residency status has NO Correlation with the PAN. NRI’s can easily obtain PAN but it does not mean that they are resident Indian.
One more misconception is that you don’t need PAN if you are transacting with a co-operative bank or rural banks. In some cases, i observed that co-operative and rural banks do not insist on permanent account number may be due to ignorance or XYZ reasons. Just to clarify that there is NO such exception. In this post, any reference to the bank means all type of banks i.e. Private, Public, Cooperative, Rural, Foreign Banks etc regulated by RBI.
Before i proceed, i would like to share a sort of interesting paradox with the readers. In almost 100% cases, i observed people say ” My PAN No is so and so”. PAN itself means Permanent Account Number. Therefore, “PAN No” is incorrect terminology. It’s like saying “Ek Thanda Cold Drink Lana” :).
Transactions in which it is mandatory to Quote PAN
1. The first one i know is cash deposit of more than Rs 50,000 in a day with a bank. I remember a few years back when this rule was implemented and i was not aware. I received a call from branch operations manager to visit the branch again and quote the permanent account number for cash deposit :).
2. Except for 2 wheeler if you are buying or selling any vehicle or motor vehicle then it is mandatory to quote permanent account number.
3. To open a bank account. The only exception is Basic Savings Bank Deposit Account.
4. If you are applying for a credit card or debit card. The reason being, credit card payment of Rs 10L or more in an FY is reported in Annual Information Return.
5. To open a Demat Account
6. If you sale or purchase any goods or service of any nature and the amount exceeds Rs 2L per transaction
7. Your minor child can quote your PAN if he/she does not have any income chargeable to income tax. In case, minor child has income chargeable to income tax then he/she should obtain permanent account number in his/her name.
8. Payment of more than Rs 50,000 in cash to a hotel or restaurant against the bill at any one time. In order to avoid sharing Permanent Account Number, people request the hotel staff to divide/break the hotel bill into multiple bills. It is not allowed as the clause reads “Bill at any one time”.
Please note that if you are making a payment of more than Rs 50,000 to a hotel/restaurant through credit card or debit card then it is not mandatory to quote PAN.
9. If you buy or sell any immovable property worth more than Rs 10L. Here i would like to clarify 2 points
- If you are buying a joint property for an amount exceeding Rs 10L but your contribution is less than Rs 10L. In this case, you have to quote PAN
- If you are buying a property for less than Rs 10L but the guidance value/circle rate/ready reckoner rate or stamp duty valuation u/s 50C of Income Tax Act is more than Rs 10L. In this case, it is mandatory to quote the Permanent Account Number.
10. If you are buying/selling stocks or shares worth more than Rs 1L per transaction of an unlisted company i.e. not listed on a recognized stock exchange.
11. Executing a contract for sale or purchase of securities other than shares for an amount more than Rs 1L per transaction.
12. If the insurance premium paid to the insurer is more than Rs 50,000 during the financial year.
13. A fixed deposit of more than Rs 50,000 or if the cumulative fixed deposit amount is more than Rs 5,00,000 during an FY with
- Post office
- Nidhi referred u/s 406 of the Companies Act 2013
- NBFC (Non-Banking Financial Company)
For example, if open four fixed deposits of Rs 40,000 each with each of the above mentioned 4 financial institutions. In this case, i will not satisfy the condition of Rs 50,000 but my cumulative deposit amount is Rs 6,40,000 i.e. more than Rs 5L. Therefore, i should quote PAN for each fixed deposit of Rs 40,000.
14. Cash payment of more than Rs 50,000 during one day for Bank Draft, Banker’s Cheque or Pay Order
15. Payment of more than Rs 50,000 for
(A) Acquiring bonds issued by Reserve Bank of India
(B) Acquiring bonds or debentures issued by a company or an institution
(C) Purchase of Mutual Fund units
16. Cash payment towards one or more pre-paid payment instruments exceed Rs 50,000 during FY through Cash/Cheque/Bank Draft/Pay Order/Banker’s Cheque. Please check following link for more details
17. Cash payment of more than Rs 50,000 in connection with foreign travel or purchase of foreign currency.
# If you don’t have PAN for carrying out above mentioned transactions then you can make a declaration in form no 60.
# NRI’s don’t require/quote PAN for transactions mentioned in the Point no 4, 6, 8, 14, 15(A), 16 and 17
Penalty for Violating provisions of PAN
A penalty of Rs 10,000 can be levied u/s 272B in the following scenarios
1. Holding of more than One PAN. If by mistake or error, you are allotted more than one PAN then you should immediately surrender the additional PAN card(s).
2. If you knowingly quote incorrect PAN in any document/transaction.
3. If you share incorrect Permanent Account Number with the person/bank/financial institution deducting/collecting the tax.
4. If you do not obtain Permanent Account Number even when you are liable to do so
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