Question 1 OR (a)
Permanent Account Number and six transactions needing it (as set, 1961 Act)
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 1 OR (a) · 6 marksWhat is a Permanent Account Number (PAN)? State any six transactions in which quoting the PAN is mandatory. (6)
Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2024-25 (previous year 2023-24), with the dates as printed. A current version under the Income-tax Act, 2025 for tax year 2026-27 follows when the Income-tax Rules, 2026 are available. The question rests on the PAN provisions of the Income-tax Act, 1961 and its Rules; the answer gives the corresponding provisions of the Income-tax Act, 2025 and says so.
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- any sixThe paper asks for any 6, and this is one of them. Only 6 are marked: a further earns nothing.
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 Meaning and structure of PAN; who must apply 2 marks 3 min
- 2 Six transactions with their limits 3 marks 5 min
- 3 Consequences of default 1 mark 2 min
- Check: every ask answered, key terms underlined 1 min
Easy marks
- Step 1 opens with the meaning: a one-line definition, the quickest mark in it.
Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks. End with step 3 in a line or two.
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
A Permanent Account Number (PAN) is a ten-character alphanumeric number allotted by the Income-tax Department under section 139A of the Income-tax Act, 1961. It identifies a taxpayer for life and across the country: it does not change when he moves or changes his Assessing Officer, and no one may hold more than one PAN (section 139A(7)). Its form is five letters, four digits and a check letter (for example, AAGPS4321K): the fourth letter shows the holder's status (P for an individual, C for a company, F for a firm, H for a Hindu undivided family, T for a trust). Through it the Department links a person's returns, tax payments, tax deducted or collected at source and reported high-value transactions.
Who must apply (section 139A(1))
- a person whose total income in a previous year exceeds the maximum amount not chargeable to tax;
- a person carrying on a business or profession whose sales, turnover or gross receipts exceed, or are likely to exceed, ₹5 lakh in a previous year;
- a person required to file a return under section 139(4A) (a charitable or religious trust);
- a resident other than an individual entering into financial transactions of ₹2,50,000 or more in a year, and its directors, partners, trustees, karta, chief executive or office bearers.
Anyone else may apply voluntarily (section 139A(3)). The PAN must be quoted in returns, challans and correspondence with the Department, and in the documents of the transactions prescribed in rule 114B (section 139A(5)).
Six transactions in which quoting PAN is mandatory (rule 114B of the Income-tax Rules, 1962)
| # | Transaction | Limit |
|---|---|---|
| 1 | Sale or purchase of a motor vehicle other than a two-wheeler | Any amount |
| 2 | Opening an account (other than a time deposit, which has its own limits below, and a basic savings bank deposit account) with a bank or co-operative bank | Any amount |
| 3 | Applying for a debit or credit card | Any amount |
| 4 | Paying a hotel or restaurant bill in cash | Above ₹50,000 at any one time |
| 5 | Sale or purchase of immovable property | Value or stamp duty value above ₹10 lakh |
| 6 | Cash deposits with a bank or post office | Above ₹50,000 in a day |
Others include opening a demat account, cash payment for foreign travel above ₹50,000, buying mutual fund units, debentures or RBI bonds above ₹50,000, life insurance premium above ₹50,000 in a year, time deposits above ₹50,000 at a time or ₹5 lakh in a year, and sale or purchase of goods or services above ₹2 lakh a transaction. A person who has no PAN must give a declaration in Form 60 for such a transaction.
- A PAN not linked with Aadhaar by the date fixed becomes inoperative (section 139AA).
- Failure to apply for or quote a PAN, or quoting a wrong one, can attract a penalty of ₹10,000 (section 272B).
- A payee who does not furnish a PAN suffers tax deducted at source at a higher rate, generally 20% (section 206AA).
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Meaning and structure of PAN; who must apply | 2 |
| 2 | Six transactions with their limits | 3 |
| 3 | Consequences of default | 1 |
| Total | 6 |
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