What is a PAN?
A PAN or a Permanent Account Number is a unique 10 digit alphanumeric identity which is alloted to identify a taxpayer by the Income Tax Department under the Central Government in the name of Central Board of Direct Taxes.
The PAN is also serves role of an identity proof and has become very important ID in case of financial transactions. Some of the transactions which are not possible without PAN includes receipt of taxable salary, Receipt of professional fee above specified limits, Purchase of assets above specified limits and more.
The objective behind the introduction of PAN was to initiate a universal identification process to track the financial transactions to avoid the tax evasion.
Who are required to obtain PAN?
Any person earning income in India which is chargeable to tax and any businessman who’s aggregate turnover/gross receipts from the business exceeds Rs. 5 Lakh rupees in the previous financial year.
How to Apply for PAN?
The Income Tax Department has notified Form 49A and Form 49AA for Indian citizens and foreign nationals respectively.
Following documents are required to be attached with the form along with prescribed fee to make an application for the allotment of Permanent Account Number.
- 2 Passport Size Photographs (only for individuals)
- Proof of Identity
- Proof or Residence
- Proof of date of birth (For individuals only)
What are the financial transactions for which PAN is mandatory?
For following transactions PAN is mandatory:
- For making the payment of Direct Taxes
- For filing income tax returns
- For sale/purchase of any immovable property in excess of Rs. 5 lakhs
- Sale/purchase of any motor vehicle other than a two wheeler
- For making payment in excess of Rs. 25,000 to a hotel or restaurant in one shot
- For making a cash payment in excess of Rs. 25,000 in connection with a foreign travel
- For acquiring Bonds from Reserve Bank of India for Rs. 50,000 or more
- For acquiring bonds/debentures/shares from any company for Rs. 50,000 or more
- Purchase of Mutual Funds
- Deposit into any banking institution exceeding Rs. 50,000 in 24 hrs
- Purchase of bullion or jewellery in excess of Rs. 5 lakhs
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