What is a PAN Card? When was it introduced, who needs it, how to apply; everything you need to know

In India, the PAN card, or Permanent Account Number, is one of the most important financial documents for any citizen. The PAN card is issued by the Income Tax Department. A PAN card is required for most financial transactions, including opening a bank account and paying taxes. The Income Tax Department introduced the PAN card to store information about taxpayers. This number, which is given to every taxpayer in the country, is unique, meaning that there can be only one card in the country with a specific serial number.

By issuing a PAN card, the Income Tax Department can easily collate and review the financial transactions of each taxpayer. Their financial transactions will be recorded under the PAN card number in the name of each individual or company. In this way, the Income Tax Department can easily track all tax-related information and prevent tax evasion. This is the main objective behind the introduction of the PAN card. The Income Tax Department has established PAN card provisions with the aim of preventing illegal transactions and black money.

When was the PAN card first introduced?

The PAN card was first introduced in India in 1972 but was made legal in 1976. Prior to this, the Income Tax Department had allocated a General Index Register Number or GIR number to taxpayers. PAN card numbers were issued manually until 1985, but there were allegations that these numbers were not authentic. As a result, this manual PAN number system was discontinued. After studying similar systems used in countries such as the United States and the United Kingdom, the current PAN card system was introduced in 1995.

In the past, a PAN card was only required for paying income tax and filing income tax returns. However, now a PAN card may be required for all daily financial transactions. The ten-digit number issued by the Income Tax Department may seem simple, but it contains many important details about an individual. Apart from the PAN number, the PAN card contains the name of the PAN card holder, date of birth, father's or spouse's name, and a photograph. Therefore, the PAN card is often used as an identification document.

A person who sees a PAN card number may not immediately understand what it represents. For those who are not familiar with the PAN structure, the vast amount of information hidden behind these numbers will always be a mystery. There is one important thing that PAN holders should understand: PAN is issued to an individual only once. This means that a person can have only one PAN number. The first 5 digits of this number will always be letters, the next 4 digits will be numeric, and the final digit will be a letter. As a result, many people may not understand what information is hidden in these 10 characters.

What is the meaning of the 10 letters written on the PAN card?

Have you ever looked at your PAN card carefully? If you notice, the first three characters of any person's PAN card are in the English alphabet. The fourth letter indicates the type of owner, or which of the 10 types of owners the individual is.

C - Company
P - Individual
H - HUF (Hindu Undivided Family)
F - Firm
A - Association of Persons
T - Trust
B - Body of Persons (BOI)
L - Local Authority
J - Artificial Judicial Person
G - Government
For all individual taxpayers, the fourth letter will be P. The fifth character of the PAN card number is an alphabet, representing the first letter of the cardholder’s surname or the first letter of their second name, depending on the PAN cardholder's preference. The next 4 characters are numbers, ranging from 0001 to 9999. These numbers represent a range being processed by the Income Tax Department. The last, or tenth character, is a checksum that validates the PAN number. If your PAN card does not follow this structure, it may not be valid.

PAN Card for Transgenders

In 2018, the Central Board of Direct Taxes (CBDT) introduced the option for transgenders to apply for PAN cards. Along with the columns for male and female, a column for transgender was also included in the application form. This new option was introduced based on Sections 139A and 2955 of the Income Tax Act, making it easier for transgenders to obtain PAN cards.

For what purposes is a PAN card mandatory?

PAN cards are required for several financial transactions, including:

• Providing PAN details to the bank when depositing more than Rs 50,000.
• Applying for drafts of more than Rs 50,000.
• Applying for a credit card or investment schemes like mutual funds.
• Making transactions in assets worth more than Rs 1 lakh.
• Buying or selling land worth more than Rs 5 lakh.
• Buying or selling motor vehicles.
• Exporting or importing goods.
• Travelling abroad with a value exceeding Rs 25,000.

How many types of PAN cards are there?

As mentioned earlier, a citizen can hold only one PAN card. However, there are different types of PAN cards issued for various purposes:

• PAN card for individuals.
• PAN card for companies.
• PAN card for foreign citizens.
• PAN card for foreign companies.

The PAN card for individuals includes the person's photo, name, father’s name, date of birth, signature, QR code, date of issue, and PAN number. PAN cards issued to companies contain the company’s name, registration date, PAN number, QR code, and date of issue. Unlike individual PAN cards, company PAN cards do not include a photo or signature.

Does the PAN card ever expire or need to be renewed?

A PAN card is valid for life and does not need to be renewed. It can only be canceled in the event of the cardholder's death. Once issued, the PAN card remains valid for the lifetime of the holder.

Be cautious of messages regarding PAN card renewal. Fraudsters may use such messages to deceive people into providing their personal information. Since the PAN card contains a 10-digit alphanumeric number, along with the cardholder’s details, the possibility of fraud increases.

When should a PAN card be surrendered?

You may need to surrender your PAN card in the following situations:

• If you have more than one PAN card.
• If there are incorrect details in your PAN card.
• If the Income Tax Department requests you to do so for other reasons.

How do you surrender your PAN?

• Go to the official NSDL portal and click on 'Apply for PAN Card Online.'
• Select 'Correction in Existing PAN Data' under the 'Application Type' section.
• Fill out the PAN cancellation form with the necessary details.
• Click 'Submit' and make the payment.
• Download the application for future reference.

What if I have more than one PAN card?

According to Income Tax Department rules, a person cannot have more than one PAN card. Holding multiple PAN cards is a violation of the Income Tax Act, and legal action can be taken against you.

What is the penalty for holding multiple PAN cards?

The Income Tax Department can initiate proceedings under Section 272B of the Income Tax Act, 1961, and impose a fine of up to Rs 10,000.

Can changes be made to the PAN card?

Changes to your PAN card can be made through the National Securities Depository Limited (NSDL) website or the UTISL portal.

Do children need a PAN card?

A PAN card is often required for income tax purposes or as proof for KYC, typically for adults. However, minors under the age of 18 can also obtain a PAN card. The parents or guardians must apply for it, and the card issued to minors does not include their photo or signature. The PAN card must be renewed when the minor turns 18.

When do children need a PAN card?

• Investment in the child’s name.
• Making the child a nominee for investments.
• Opening a bank account in the child’s name.
• If the minor has a source of income.

How to apply for a PAN card for children:

• Visit the official NSDL website and download Form 49A.
• Fill out Form 49A with the required personal information.
• Upload the child's birth certificate, necessary documents, and a photo of the parents.
• Upload the parents' signature and make the payment.
• Submit the form and track the application status.
• After verification, the PAN card will be issued within 15 days.

Is someone misusing your PAN card? How to find out?

To check if your PAN card is being misused, monitor your financial transactions, credit reports, and your Income Tax Account. If you notice suspicious activity, report it immediately to the bank or relevant institution, and file a complaint with the local police.

Link PAN with Aadhaar

The Income Tax Department has mandated linking your PAN card with Aadhaar. If not linked, your PAN will become inoperative, causing difficulties in financial transactions such as banking, share trading, and other activities that require PAN.

What to do if you lose your PAN card?

If you lose your PAN card, report it to the nearest police station. Then, apply for a duplicate PAN card through the NSDL portal by following the required steps. You will receive the new card in 15 to 20 days, or an e-PAN in 10 minutes.

PAN card is also required for buying gold

Under the Prevention of Money Laundering Act (PMLA), 2002, PAN is required for buying gold worth more than Rs 2 lakh in a day. Transactions exceeding Rs 10 lakh in cash also require the presentation of a PAN card.

PAN 2.0

The Income Tax Department is in the process of issuing a more robust and secure version of the PAN card, known as PAN 2.0. This new version will be equipped with enhanced security features, a QR code, and other features designed to ensure the validity of the card.