Concept of PAN Card and its application in everyday life

PAN Card is a Permanent Account Number which consists of 10-digit alphanumeric characters and is
assigned to all taxpayers in India. It is issued under the Indian Income Tax Act, 1961 by the Indian Income
Tax Department under the supervision of the Central Board for Direct Taxes (CBDT).

Basically, PAN card is an electronic system in which all the tax related information of a person or
company is recorded against a single PAN number. Let us tell you that two tax paying entities can't have
the same PAN Card. For major financial transaction PAN card is mandatory like for opening a bank
account, sale or purchase of assets etc. That is why PAN card provides the details of the account holder
in a unique way.

Income tax department can link all the transactions of a person with the department by the help of PAN
card unique number. These transactions may be payment of tax, tax deduction, tax collection at source
credits, income return, wealth, gift or may be any specified transactions etc. So, we can say that PAN card
is a universal identification key which help in tracking the financial transactions that may have a taxable
component to prevent the tax evasion. It remains unaffected throughout India by the change of address.

Benefits of PAN card

- PAN Card is important for doing transactions of sale or purchase of assets, of any immovable property
valued at five lakh rupees or more, during sale and purchase of motor vehicles having more than two
wheels.

- PAN card is required to open a bank account in both private and nationalised banks.

- PAN card is required for Phone connection.

- PAN card is required for new Gas connection.

- PAN Card is required to make one time payment against their bill of the amount exceeding twenty-five
thousand rupees in any hotels and restaurants.

- To make payment in cash at any one time of more than twenty-five thousand rupees while travelling to
any foreign country PAN card is required.

- PAN card may help in the deduction of fraudulent transactions. It also reduces tax evasion and provide
transparency in transactions between buyer and seller.
Significance of characters in PAN Card

Out of these 10 digits of PAN card: the first five figures represents alphabets, next four digits are
numbers and the last number is again an alphabet. All these digits have some meaning and reveal the
information of the account holder.

For better understanding of the classification we have divided 10 characters of PAN card into five parts as
follows:

The first three characters are normal alphabetic series starting from AAA to ZZZ. Department of I.T
allocates the digits randomly which is a combination of the letters like AZT or ZRT.

(2) Fourth Character:

The fourth character represents the status of the PAN card holder. It is one of the most important
character and those who deals in PAN card usually look at this character to identify the status of that
particular person. The fourth character for a majority of PAN holders is the letter “P”, which stands for
“person”. The other nine letters that can represent the fourth character are C, H, F, A, T, B, L, J, and G.

These letters stands for:

C – Company

H – Hindu Undivided Family

F – Firm

A – Association of Persons

T – Trust
B – Body of Individuals

L – Local Authority

J – Artificial Juridical Person

G – Government

Taxation in India: An Overview

(3) Fifth Character:

The fifth character represents the first alphabet of PAN holder’s last name or surname. Like a person has
Amit Goyal name then G will be the fifth character on his PAN card because his last name’s first alphabet
is G. Also, if your surname changes after marriage or due to any other reason, then also your PAN card
number will remain unchanged.

(4) Sixth to Ninth characters

These four characters are sequential numbers starting from 0001 to 9999. Like first three characters,
here too the selection is random.

(5) Tenth Character:

The last or Tenth character in the PAN card is an alphabetic check digit which can be any alphabet.

PAN card also consists of:

Name of cardholder - Individual or Company

Name of the father of the cardholder - Applicable for individual cardholders.

Date of birth - The cardholder's date of birth in case of an individual or date of registration is mentioned
in case of company or firm.

Signature of the Individual - PAN card has individual signature as a proof required for financial
transactions.

Photograph of the Individual - PAN card acts as a photo identity proof of the individual. In case of
companies and firms, photogrpahs are not present on the card.