1: What is PAN?
PAN is a ten-digit alphanumeric unique identifier, issued by Income Tax Department of India. PAN is mandatory for transacting in financial markets in India.PAN enables the department to link all transactions of the “person” with the Tax Department. These transactions include tax payments, TDS/TCS credits, return of Income / wealth / gift, specified transactions, correspondence and so on. PAN, thus, acts as an identifier for the “person” with the Tax department.
2: Mr. Clyde wants to obtain a PAN. What procedure should he follow to apply for the PAN?
Application for PAN can be made online/manually in paper in the prescribed Form along with required proof of identity and address and a passport size photograph to the PAN Authority. Also, in case of NRIs, there are few additional requirements of getting the documents properly attested by the Indian Embassy/Consulate/High Commission/Apostille. In certain cases, an Individual can digitally signed the PAN Application by using a DSC.
3: Which transactions statutorily require quoting of PAN by Mr. Clyde?
Mr. Clyde has to quote his PAN while investing in India. Further, Mr. Clyde is required to quote his PAN while executing many transactions in India, for example:
For filing the Returns of Income, challans for payment of Income Tax.
- Opening of an account with a Bank, Demat Account for shares.
- For investing in shares and securities i.e. Initial Public Offers, Portfolio Investment Schemes and Portfolio Management Schemes, Mutual Funds.
- Sale or purchase of immovable property exceeding Rs.10 lakhs.
- Payment of Life insurance exceeding Rs.50000.
- Payment exceeding Rs. 50000/- in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
4: Mr. Jim does not hold a PAN in India. He has income from various sources in India, which yield an annual income of Rs. 1 lac. Are there any adverse consequences of not holding a PAN?
In case Mr. Jim does not hold PAN in India, his incomes will be subject to TDS at highest of the following rates:
- 20% or
- Rate of TDS actually to be deducted i.e. 10% (DTAA rate for interest income in certain countries) or 15% (certain Short Term Capital Gains) or 30% (other incomes) etc.
In view of above income earned by Mr. Jim in spite of being eligible to be taxed under special rate will be liable for tax deduction @ 20% (if higher of the two parameters) on account of non-availability of PAN. Hence, it is advisable for Mr. Jim to obtain PAN.
5: Mr. Tom has already obtained a PAN but has income below the prescribed taxable limit. Is it mandatory for him to file ROI?
It is not mandatory to file income tax return if PAN is obtained. Hence, as Mr. Tom is earning income below the taxable limit, he is not required to file his ROI.
6: Can a person hold more than onePAN number?
Obtaining or possessing of more than one PAN is against the law, for which a penalty may be imposed.
7: Is a minor allowed to hold a PAN card?
Yes, a minor can hold a PAN card. The minor will have to apply through a representative assesse and will need additional documents to be submitted along with the PAN application form. Further, photograph of minor shall not be printed on the PAN card.