A PAN card is a 10 digit unique number that is assigned to every tax paying individual and entity in India. The PAN card was designed solely for the purpose of helping the government identify taxpayers and ensuring these entities paid the taxes due as per the tax slabs they fall under.
While many think a PAN card is only required at the time of filing your Income tax returns, which is usually once a year, there are a number of uses that the PAN card fulfils relating to income tax.
Reasons Why PAN Card is Essential for Income Tax
6 reasons why a PAN card is essential when it comes to tax are listed below.
PAN Card for Filing Income Tax Returns
A PAN card is a necessity to file your Income Tax returns, since the government uses the PAN card to identify an individual or entity from a taxation point of view. The PAN card number has to be quoted when filing Income Tax returns by individuals and entities, failing which the individual or entity’s Income Tax returns will not be acknowledged and the government will assume the said individual has not paid his/her taxes.
PAN Card to File Income Tax Refund
Individuals and entities who are eligible for Income tax refunds after the payment of their taxes will have to quote their PAN card number in their application form. The PAN has to be quoted as the government uses it as the only means of identification in taxation related activities. Failure to quote the PAN in such an application will result in the application not being processed and the individual/entity will not receive the refund.
PAN Number to Check Income Tax refund Status
After filing the Income Tax refund application, taxpayers can check the status of their refund on the government portal. This status can be checked only upon entering the PAN card number of the individual/entity.
PAN for Filing TDS Certificates
TDS (Tax Deducted at Source) is a tax collection method implemented by the government of India by which the tax amount is deducted at the time of disbursing the amount to the individual. Companies, traders or any entities that deduct TDS are required to furnish a TDS certificate stating the amount of tax that has been deducted. The TDS certificate has to also contain the PAN number of the payee in all documents such as TDS Returns, statement of perquisites and profits in lieu of salary.
PAN Number to log in to the Income Tax Website
Taxpayers who wish to log in to the Income Tax website for the purpose of e-filing their returns are required to enter their PAN numbers. As the Income tax Department is moving towards a paperless income tax return filing system, taxpayers will have to file their returns through the website, where registration requires their PAN numbers.
PAN Card to avoid being overtaxed
Individuals who submit their PAN card details at the time of filing their returns will avoid being over taxed, as the government will have a history of their transactions and accordingly calculate tax after considering deductions. For individuals and entities who do not quote their PAN numbers, however, the government will levy a flat 30% tax irrespective of the tax slab the individual or entity comes under. Thus, having a PAN card will help the individual avoid paying more than he/she is required to.
What happens if you have multiple PAN cards
As per the rules, having multiple PAN cards in your name is an offence. A penalty of Rs.10,000 will be levied under Section 272B of the Income Tax Act, if found to have multiple PAN.
In case, you have more than one PAN it is better to surrender it immediately.
FAQs On PAN Card for Income Tax
Apart from having a PAN card and Form 16, documents which are required by individuals while submitting an Income tax return are as follows:
- Bank statements/passbook for interest on savings account.
- Interest income statement for fixed deposits.
- TDS certificate.
- Form 26AS
- Section 80C investment documents.
- Contribution to Provident Fund
- Children’s school tuition fees
- Life insurance premium payment
- Stamp duty and registration charges
- Principal repayment on your home loan
- Equity linked savings scheme
- Mutual funds investment