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Comprehensive Guide to what is PAN and How to apply for Pan card online

PAN - The Introduction

A PAN (Permanent Account Number) card is a unique alphanumeric identifier issued by the Income Tax Department of India. It is a crucial identifier for individuals and entities engaging in financial transactions. The PAN card is essential for various financial activities, such as filing income tax returns, opening a bank account, conducting high-value transactions, and more.

The details included in a PAN card are:

  • PAN Number 

  • Full Name

  • Father's Name (Only for Individuals): 

  • Date of Birth/Incorporation

  • Photograph

  • Signature

  • Type of Holder: The type of entity or individual is identified by the fourth character in the PAN.

  • Address: The residential or office address of the cardholder is included.

  • Jurisdiction Code: This code represents the assessing officer under whose jurisdiction the PAN cardholder falls.

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 PAN: The key features

The PAN card contains a 10-character alphanumeric code, which is unique to each cardholder. The structure of the PAN number is in the form of five letters, followed by four digits, and ending with one letter (e.g., ABCDE1234F). The first three letters are random alphabetic characters, the fourth letter represents the type of holder (individual, company, HUF, etc.), and the fifth letter is the first letter of the cardholder's surname. The numeric digits in the middle are unique to each PAN card.

 

India's Permanent Account Number (PAN) has several key features that make it a crucial element in the financial and taxation landscape. Here are the key features of PAN:

Unique Identifier:

PAN is a 10-character alphanumeric code unique to each individual or entity. This uniqueness ensures precise identification in financial transactions.

Mandatory for Financial Transactions:

PAN is mandatory for various financial transactions, including opening a bank account, conducting high-value transactions, buying or selling immovable property, and more.

 Income Tax Filing:

PAN is essential for filing income tax returns. It links all financial transactions to the individual or entity, providing a comprehensive view for taxation purposes.

Prevents Tax Evasion:

Linking multiple financial transactions to a single PAN helps prevent tax evasion by providing a transparent view of an individual's or entity's financial activities.

Type of Holder Identification:

The fourth letter in the PAN code represents the type of holder, distinguishing between individuals, companies, Hindu Undivided Families (HUFs), trusts, and others.

International Transactions:

PAN is required for individuals engaged in international transactions, making it a crucial document for Non-Resident Indians (NRIs) and entities involved in cross-border financial activities.

Government Benefits and Subsidies:

PAN is often used to administer government benefits and subsidies. It ensures these benefits reach the intended recipients and minimises the risk of fraudulent claims.

Proof of Identity:

PAN serves as a valid proof of identity for individuals. It is widely accepted as an identification document in various official and financial processes.

 Financial Compliance:

PAN is a prerequisite for various legal and financial compliances, including company registrations, opening demat accounts, and complying with regulatory requirements.

Non-Resident Transactions:

For non-residents, including NRIs, PAN is essential for engaging in financial transactions in India. It facilitates the tracking of financial activities and tax liabilities for non-resident individuals and entities.

How to Identify individuals and entities through PAN

4th letter in the PAN code

The 4th letter in the PAN code represents the type of holder. Different letters signify different types of entities. 

 P:

Individual

C:

Company

H:

Hindu Undivided Family (HUF)

F:

Firm

A:

Association of Persons (AOP)

T:

Trust

B:

Body of Individuals (BOI)

L:

Local Authority

J:

Artificial Juridical Person

G:

Government

So, by looking at the 4th letter, you can identify the broad category of the PAN holder

5th letter in the PAN

The 5th letter in the PAN represents the first letter of the PAN holder's surname. This adds a level of personalisation and specificity to the identification process. For individuals, this letter is the initial letter of the individual's surname. For non-individual entities, the 5th letter might represent the first letter of the entity's name.

For example, if the 4th letter is "P" (indicating an individual), and the 5th letter is "K," it suggests that the PAN belongs to an individual, and the first letter of their surname is "K."

Example:

Let's take the PAN "BVWPL3356F" as an example:

  • The 4th letter is "P," indicating that it is an individual's PAN.

  • The 5th letter is "L," representing the first letter of the individual's surname.

 

In this way, understanding the 4th and 5th letters provides valuable information about the type of PAN holder and, in the case of individuals, offers a glimpse of their surname initial. This information is particularly useful for identifying and categorising financial and tax-related transactions.

Who can apply for a PAN card in India, and what are the categories of individuals and entities covered under the PAN eligibility criteria?

Trusts, institutions, and NPOs/ NGOs earlier having a tax exemption under Sections 10 (23C), 12A, 12AA, 35, or 80G must reapply for the same and get a new registration under Section 12AB. Additionally, Section 12AB provides for tax exemption, grants from government or foreign agencies, and Foreign Contribution (Regulation) Act (FCRA) applications to get international funding. The new concepts of provision and permanent registrations also apply. Here are the details of both types of registrations:

Individuals:

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