Four Key Benefits Of Having A PAN Card

Whether you're thinking of buying a car or  property, making an investment in the stock market or trying to convert your Indian rupees to foreign currency, there is one document you'll invariably need for each one of these activities. Any idea what that could be? 

The answer is the PAN card.

What is a PAN card?

PAN stands for Permanent Account Number. It is a unique 10-character alphanumeric identifier issued by the Income Tax Department of India to individuals and entities, primarily for tax purposes. 

The card includes details such as the name and address of the cardholder, photo, date of birth, and the PAN number. Key uses of the PAN card include as a proof of identity of the taxpayer for filing income tax returns, investing in securities, opening bank accounts, and lots more.

The PAN number remains unchanged throughout the cardholder's lifetime.

What are the Benefits Of Having A PAN Card?

Here's an elaboration of the various advantages of possessing a PAN card:

A. Taxpayer Identification

PAN card serves as a vital document for taxpayer identification in India. It helps in tracking an individual's financial transactions and ensures that they comply with tax regulations. 

Here are some of the ways in which a PAN card helps by identifying a taxpayer:

1.  Links all financial transactions: PAN makes it easy for the government to track an individual's financial activities and identify any discrepancies in their tax filings. The government can also use this information to verify the income and expenses reported by an individual in their tax returns.
2. Availing tax benefits: PAN card is essential for individuals who wish to claim tax benefits under various sections of the Income Tax Act, such as Section 80C, Section 80D, and Section 10 (10D).
3. Applying for a Tax Deduction & Collection Account Number (TAN): TAN is required for individuals who deduct or collect taxes on behalf of the government. To apply for TAN, individuals need to have a PAN card.

B. Preventing Tax Evasion

Here are some ways in which a PAN card helps in preventing tax evasion-

1. Unique identification number: As per the Income Tax Act, one individual can only have one pan number. It is illegal to hold more than one PAN number. Since all financial transactions are linked to the PAN number, it ensures that individuals comply with tax regulations. It makes it difficult for individuals to evade taxes by hiding their financial transactions or using multiple identities to conduct financial transactions.
2. Mandatory for high-value transactions: The PAN number has to be provided for any high-value transactions (transactions over Rs. 50,000) such as buying or selling immovable property, making investments, and opening bank accounts. This helps in preventing tax evasion by ensuring that all high-value transactions are linked to an individual's PAN.
3. Helps in identifying non-filers: The government can use PAN data to identify non-filers and take appropriate action against them. 

C. Starting Up A New Business

Here are some ways in which a PAN card helps in starting a new business-

1. Registering The Business: A PAN card is mandatory for registering a business in India. It is required for all types of businesses, including sole proprietorships, partnerships, and limited liability companies. Without a PAN card, an individual cannot register their business, obtain a business bank account, or apply for licenses and permits.
2. Opening Bank Account: A PAN card is required to open a bank account for the business. It is mandatory for all banks to verify the PAN of the account holder before opening an account. 
3. Applying For Loans: A PAN card is also required for applying for loans for the business. Banks and financial institutions require the PAN card of the business to verify its identity and creditworthiness. It also helps in tracking the business' financial dealings and ensures that it complies with tax regulations.
4. Filing Tax Returns: A PAN card is mandatory for filing tax returns for the business. All businesses are required to file their tax returns and comply with tax regulations.

D. Investing 

The PAN card is a necessary document that has to be provided while investing. Here’s how it helps-

1. KYC Compliance: PAN card serves as a Know Your Customer (KYC) document, which is mandatory when you invest or apply for a bank account, loan, credit card etc.. KYC compliance is a legal requirement that helps in verifying the identity of the investor and reduces the risk of fraud and money laundering.
2. Tax Deduction: PAN card is linked to your income tax details, and hence, it helps in claiming tax deductions on investments and insurance premiums.
3. Investment Tracking: PAN card enables you to maintain a comprehensive record of all your investments and insurance policies, which is essential for financial planning and tax purposes.
4. Ease Of Transaction: PAN card makes it easy to carry out financial transactions related to investments and insurance. 
5. Easy Processing Of Refunds: When a taxpayer files an income tax return (ITR) and is eligible for a refund, the PAN card details are used to process the refund. The PAN card helps the Income Tax Department to verify the authenticity of the claimant and ensure that the refund is credited to the correct bank account. Moreover, the PAN card details also help in avoiding any fraudulent claims for refunds. 

Conclusion

In this post, we discussed the uses and benefits of a PAN card. Having a PAN card is essential for various financial transactions in India. It serves as a personal account number for taxpayers, which helps in tracking their financial transactions and ensures that they comply with tax regulations.

Disclaimer

The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.