What is PAN?
Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department. A typical PAN is AAQPR4332N.
Why is it necessary to have PAN?
It is mandatory to quote PAN on return of income, all correspondence with any income tax authority. From 1 January 2005 it is mandatory to quote PAN on challans for any payments due to Income Tax Department.
It is also compulsory to quote PAN in all documents pertaining to financial transactions notified from time-to-time by the Central Board of Direct Taxes. Some such transactions are sale and purchase of immovable property or motor vehicle or payments in cash, of amounts exceeding Rs. 25,000/-to hotels and restaurants or in connection with travel to any foreign country. It is also mandatory to mention PAN for obtaining a telephone or cellular telephone connection. Likewise, PAN has to be mentioned for making a time deposit exceeding Rs. 50,000/- with a Bank or Post Office or depositing cash of Rs. 50,000/- or more in a Bank.
All tax deductions at source for various receipts shall attract a higher rate (20%) if you donot have a PAN, with effect from 01 April 2010.