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Tuesday, December 21, 2010

What is a Permanent Account Number (PAN)?

Primarily, the PAN or the Permanent Account Number is issued by the Income tax department of India to bring into the taxpaying net all those whose incomes are taxable. It is like an identification number for Indians and has to be obtained from the income tax department regulated by the CBDT or the Central Board of Direct Taxes. Earlier, a PAN card was required for getting a phone connection, but nowadays, you would need it for opening a bank account, taking fees for professional services and also for your salary.

More of a social security number from India

If you are looking for a similarity, it is like the social security number in the United States that is issued to the legal residents of the US and the citizens. Earlier, many people used to earn money and avoid paying taxes in India. It led to a parallel economy where the state was robbed of its due revenue. To counter the problem, the government came up with a ready identification number that has to be quoted for all financial transactions. It was impossible for the government to keep a tab on all the monetary dealings that were taking place.

Among the most unique features of the PAN card is that the number does not change even if you shift your residence form one part of India to the other. The number has a total of 10 alphanumeric characters where the letters form the first 5 characters, numbers comprise the next 4 and the last is again a letter. Every income tax payee in India is easily identifiable by the PAN number he or she holds. The authenticity of a PAN card is determined by the structure of the numbers and in case a person's PAN card does not conform to the pattern, the card would be deemed invalid. It also carries a recent headshot of the holder.

Mandatory for ready identification

Depending on what you are and your status as an assessed, the 4th character of the Pan number is a ready determinant. You could be assessed for income tax purposes as a person, a company, a company or firm, HUF or Hindu undivided Family, an Association of persons or AOP, the government, body of individuals or BOI, local authority or an artificial juridical person. By the fifth character of the PAN card you can easily identify the surname of the person to whom it belongs. Even if you don't pay any income tax or do not fall under the tax ambit, you can hold a PAN card. If you don't need to pay any taxes, you could even be assessed although your income tax liability could be zero.

It is not only applicable if you earn an income as the income tax department in India requires and has made a PAN card mandatory for everyone. You would need it for trading in stocks, buying or selling properties, paying outstanding taxes to the income tax department or even for consulting with the department. Nowadays, even applying for a visa requires you to have a PAN card. Primarily, it is meant of carrying on any type of financial transaction in India. You have to quote the PAN number allotted to you in every document that you sign.

It empowers the income tax officials to keep track of any undisclosed income or transactions that you may carry out during an accounting year. You can fill out form 49A and submit it to the tax authorities near you or render help from some private agents that help out non resident Indians and persons of Indian origin to obtain a PAN card. After applying for a PAN card you can keep track of the process and the status it is in by checking out the website.

Bio: Manish Sharma is an Investment Advisor. He has been writing on investment and finance related topics for many years. Presently, he is working with http://www.pancardnri.com/ (a brand of http://www.NriInvestIndia.com).

1 comment:

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