Permanent Account Number or PAN is one of the most crucial documents for Indian individuals and businesses. It is a 10-digit alphanumeric number that is unique to the holder and therefore, one entity can only possess a single PAN to its name.
That’s why the Income Tax Department is emphasising on linking PAN to Aadhaar card. As per the latest report, nearly 30.75 crore PANs are linked with Aadhaar.
This measure is also evidence to the fact that over the years the use of PAN card has gone beyond its initial purpose of tax filing, even though it still remains one of the more crucial purposes of the number.
Therefore, it is essential to understand the importance of a PAN card and how individuals can and need to utilise it.
Why is a PAN card important?
- Income tax return filing
The primary purpose of a PAN card is to enable ITR filing. Individuals cannot file their income taxes without their PANs. Naturally, those whose income exceeds the threshold amount for ITR filing need to obtain a PAN card.
- Used in sale and purchase of property
One of the essential benefits of PAN is that entities can use it in legalities when buying or selling immovable properties. It shall also be noted that a PAN card is a mandatory document that entities need to produce in transactions of that sort if its value is equal to or exceeds Rs.10 lakh.
- Tax deduction benefits
Financial institutions deduct TDS from FD and/or savings accounts if the total amount of interest the account holder earns is Rs.40,000 or more annually. If such an account holder links his/her PAN with the said account, then TDS deduction would be 10%. Otherwise, such a financial institution would debit 20% as TDS. Saving TDS on FD interest is a critical benefit of PAN card.
Read Also: Permanent account number benefits
- Opening of DEMAT account
Entities need to provide their PAN when opening a DEMAT account. This account is mandatory for individuals who deal in stock markets, to hold securities in a dematerialised form.
- Enabling hefty one-time payments
Another critical need of PAN card arises when individuals undertake a transaction of Rs.50,000 or more. It involves payment to hotels or restaurants, issuing cheques or demand drafts, investing in mutual funds, purchasing bonds or debentures issued by a corporate body or RBI, depositing with a financial institution, paying premiums for insurance policies, etc.
Apart from that, individuals also need to produce their PAN when buying or selling securities, other than shares, of an amount exceeding Rs.1 lakh. Another use of PAN card is to undertake any purchase or sale of shares not listed in a recognised stock exchange of more than Rs.1 lakh.
- Opening of accounts
Financial institutions require accountholders to produce their PANs when the deposit amount in their savings account or fixed deposit amount exceeds Rs. 50,000.
- Acts as an identity proof
Perhaps the most critical significance of PAN is that it acts as an identity proof. Nearly all institutions in India accept PAN as a legitimate document, which can be used to apply for loans, purchasing something on credit, and even during job enrolments.
However, due to its significance as a legitimate identity proof, individuals also run the risk of identity theft. In that case, they can purchase an identity assure policy to receive financial coverage for losses on its account.
- Tax compliance
The primary use of PAN card from the perspective of the government is that it ensures tax compliance and minimises the possibility of tax evasion.
Apart from the aforesaid benefits and significance, it is also mandatory for individuals to acquire a Permanent Account Number for their start-ups.
Keeping in perspective the importance of this document, individuals need to ensure they have it in their possession at all points. Therefore, it is critical to avail a replacement PAN in case of loss. With Bajaj Finserv Pocket Insurance & Subscriptions like the Wallet Care policy, individuals can avail reimbursement for the expenses necessary to opt for a PAN replacement.
Moreover, loss of wallet can also lead to card frauds, which has serious financial implications on the cardholder. In that case, individuals can also avail a fraudulent charges insurance cover to ensure financial coverage against losses of that nature.
