The Indian government has made it mandatory for all income- as well as non-income-earning individuals to possess a PAN card. PAN cards provide a unique identity for each income-earning individual and identifies individuals who have a source of income and fall under their respective tax brackets.
PAN Card for Individuals
Individuals who earn income will have their earnings classified based on the source from which they derive money. Doing so will enable the Income Tax Department of India to assess the right categories under which the individual must be tax, and the rate of tax that is applicable to the individual. The different types of income that can be earned by an individual in India include earned and unearned incomes. Earned income includes salary from profession or employers, and unearned income includes pensions, social security and retirement benefits, strike benefits, royalties, unemployment compensation, direct child support, cash gifts by anyone who does not constitute part of the individual’s family, etc.
Importance of PAN Cards for Individuals
PAN Cards are not only mandatory for all income-earning individuals, but also provide a number of benefits as follow:
- To sell or purchase immovable properties within the country.
- To purchase automobiles.
- To purchase banker’s draft, checks and pay orders.
- To purchase debentures or shares that exceed Rs.1 lac in value.
- To make deposits in excess of Rs.50,000.
- To open a demat account, avail a credit card, and starting a bank account.
- A PAN card can also be used as a valid photo ID proof.
- To enter into various financial transactions.
- To obtain cell phone and landline connection.
- PAN Cards are especially useful for NRIs as they make it relatively simple to purchase property or engage in business within the country.
- To open minor accounts.
Importance / Benefits of PAN Card for Income Tax Authorities
PAN Cards enable the authorities to estimate the overall tax generated in India. As such, it also aids in determining the rate of tax to be applied to various income classes. The Income Tax Department of India relies on PAN to track the financial transactions of all individuals, and based on the information, they calculate the rate at which you must be taxed. Following are the benefits afforded by PAN cards to the Income Tax Department of India:
- It is used as a proof of identity as it includes the holder’s name, address and photograph.
- It enables the department to determine the tax slab applicable to each individual. Individuals without PAN cards will be subject to 20% tax regardless of which bracket they fall under.
- It makes it easier for authorities to track the income earned by individuals and apply the associated taxes in accordance.
- Since PAN numbers are unique to each PAN Card holder, there will be no concerns of misuse even if you lose the card, or if you have a change in name or address.
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New PAN Rules
Under the leadership of Prime Minister Narendra Modi, the Indian government has made amendments to PAN rules. Following are the key rules in the new mandate:
- All individuals who wish to make transactions like foreign travel or hotel bills in excess of Rs.50,000 will have to furnish their PAN card.
- PAN cards will be used for all transactions, even for the purchase of jewellery in excess of Rs.2 lacs, whether it is paid in cash or by card.
- PAN cards are compulsory for buying immovable property valued in excess of Rs.10 lacs. This is one of the few amendments that has been welcomed positively by the public as the previous limit for the purchase of immovable property was Rs.5 lacs, now making things easier for small home buyers.
- PAN should be mandatorily quoted for term deposits more than Rs.50,000 in one shot, or Rs.5 lacs in case they are made over a year with NBFCs, post offices and banks.
- PAN will be compulsory for all payments exceeding Rs.50,000 for prepaid instruments or cash cards in addition to acquiring shares of unlisted companies in excess of Rs.1 lac.
- PAN Cards are compulsory for opening every kind of bank account except Pradhan Mantri Jan Dhan Yojana accounts.
- PAN Cards are mandatory for making cash deposits in excess of Rs.50,000, or to buy bankers cheque / pay orders / bank draft worth Rs.50,000 or more, and payment of LIC premiums exceeding Rs.50,000 per year.
Individuals who do not possess a PAN card but wish to carry out transactions that mandatorily require a PAN will be required to fill up and submit Form 60. This form requires an individual to provide personal information such as name, date of birth, address and mobile number in addition to information regarding the mode of transaction, such as cash, card, online transfer, cheque, banker’s cheque, draft, etc.