"What is the use of PAN Card?", a friend asked in a slightly broken Indian English. Here is our answer to him:
PAN is a Permanent Account Number (10 digit alphanumeric number), which is issued by the Income Tax Department in India.
A PAN Card is used as a document of identity proof. Another important use of PAN Card is that it is required mandatorily when opening a bank account or carrying out financial transactions.
It is similar to the 9 digit Social Security Number (SSN) that is issued in the United States.
Section 139A of the Income Tax Act 1961 is the relevant section that lays down the requirements for the same.
The main purpose why the Government of India issues PAN cards: prevention of tax evasion. By requiring people to fill their PAN card numbers when engaging in money transfer, the IT Department can keep track of all monetary transactions that take place, in order to prevent tax evasion.[caption id="attachment_19860" align="aligncenter" width="300"] This little card has multiple uses![/caption]
A PAN card is mandatorily used for the following:
Non-Resident Indians (NRIs) can fill the form 60 instead of PAN, as it is not mandatory for them to have PAN cards. However, it is definitely useful to have a PAN Card.
Important legal provisions: While Rule 114 of the Income tax Rules lays down the procedure for applying for a PAN Card, Rule 114B of the Rules mandates the documents in which the PAN card number is required to be quoted.
Rule 114C lists the persons who are exempt from the requirements of PAN application under Section 139A.
Failure to comply with the requirements of Section 139A results in the imposition of fine worth Rs. 10000 (according to Section 272B of the Act).