Permanent Account Number and who must obtain one (as set, 1961 Act, AY 2017-18)

Meaning of PAN

A Permanent Account Number is the identification number that the Assessing Officer allots to a person for the purposes of the Income-tax Act (section 139A, Explanation, clause (b)). Under the new series it is made up of ten alphanumeric characters (Explanation, clause (c)). It stays the same for the person's lifetime and across changes of address or Assessing Officer, and the Department uses it to link a person's returns, tax payments, tax deducted at source and large transactions to one record. Nobody may hold or obtain a second number once one under the new series has been allotted (section 139A(7)). The Board may by notification fix a date from which persons holding numbers allotted earlier must apply for one under the new series; once the new number is allotted, the earlier one ceases to have effect, and a person who already holds a new-series number does not apply again (section 139A(4) and its proviso).

Who must apply for a PAN

Section 139A(1), as it stood for assessment year 2017-18, obliges a person who does not yet hold a number to apply to the Assessing Officer, within the time prescribed, in four cases:

1. his total income, or the total income of anyone else for which he is assessable, for any previous year was above the amount that is not chargeable to tax (clause (i));
2. he carries on a business or profession whose total sales, turnover or gross receipts exceed, or are likely to exceed, ₹5,00,000 in a previous year (clause (ii));
3. he must file a return under section 139(4A): a person receiving income from property held under trust for charitable or religious purposes, or voluntary contributions, whose total income as a representative assessee, computed without giving effect to sections 11 and 12, exceeds the amount not chargeable to tax (clause (iii));
4. as an employer he had to file a return of fringe benefits under section 115WD (clause (iv)).

The two cases about non-individual residents entering financial transactions of ₹2,50,000 or more, and their directors or partners, were added only from 1 April 2018 (section 139A(1)(v) and (vi), with their footnote), so they do not apply to this year. Beyond these, the Central Government may by notification require a class of persons to apply, for instance importers and exporters, or anyone whose information would be useful for the Act; such persons must apply within the time the notification mentions (section 139A(1A) and (1B)).

Must every person obtain a PAN?

No. The duty to apply rests only on the persons covered by section 139A(1), (1A) and (1B), and on holders of an earlier number once a notification under section 139A(4) calls them to apply under the new series. A person outside them, for example a student with no taxable income, is under no obligation. He may still apply of his own accord, and the Assessing Officer must then allot a number at once (section 139A(3)); the Assessing Officer may also allot one to any other person, having regard to the transactions prescribed (section 139A(2)). In practice, anyone who wants to enter a transaction for which the number must be quoted will need one, though until a number is allotted the person quotes his General Index Register Number instead (second proviso to section 139A(5)).

Using the number once allotted

The holder must quote his number in his returns and letters to income-tax authorities, in tax challans, and in the documents for the transactions the Board prescribes, and must tell the Assessing Officer of a change of address or of the name or nature of his business (section 139A(5)). A person from whose payment tax is deducted at source must give his number to the deductor, or his General Index Register Number until a number is allotted (section 139A(5A) and its proviso), and a person receiving a document for a prescribed transaction must see that the number has been quoted on it (section 139A(6)).

Penalty

A failure to comply with section 139A may lead the Assessing Officer to levy a penalty of ₹10,000 (section 272B(1)). Anyone who must quote the number in a section 139A(5)(c) document, or intimate it under section 139A(5A) or (5C), and gives a false one, knowing or believing it false or not believing it true, faces the same penalty (section 272B(2)). No penalty order may be passed unless the person has been given an opportunity of being heard in the matter (section 272B(3)).