New PAN card rules are mainly to be followed by the non-individual business person and the main motive of bringing these rules into effect is to curb the tax evasion and increased the tax base. PAN is known as the Permanent Account Number, that can be used as an identity of an Individual, families (HUF-Hindu Undivided Family) and corporate (both Indian and foreign), mainly for those file Income tax returns. PAN card comes with a 10-character alpha-numeric identifier that has to be obtained by all the judicial entities detectable under the Indian Income Tax Act, 1961.
If you are looking to register your company or trying to make amendments in the management of the company, then PAN card is one of the mandatory documents required for these process. While registering your company, if you happen to not have a PAN card, then start advisors will assist you in getting a PAN card and let the process to be completed within a limited period of time.
Further, we will discuss the structure of PAN card, PAN new rules and, PAN uses.
New PAN card rules to be effective from December 5
· TAX limit
The Income Tax Department has introduced certain new PAN card rules that will be applicable from December 5, 2018. All the entities which make more than 2.5 lakh or more in a year are required to obtain the PAN card through the Central Board of Direct Taxes (CBDT).
· Who needs PAN
If there is a company who has a managing director, director, partner, trustee, author, founder, Karta, chief executive officer, principal officer or office-bearer or any other individual related to the company are required to file the application for PAN if they don’t have one, on or before 31 May of the successive financial year
· PAN for business
Even if the total sales, turnover or gross receipt is not going beyond Rs. 5 lakh in a financial year, you have to apply for the PAN. This is supposed to increase the tax base and prevent evading of taxes.
· Father’s name
There are certain changes that are introduced in the application of PAN; which says that it is not mandatory to mention the fathers’ name of the applicant. This is considered to be a positive step towards simplification of income tax rules.
· Single parent
In case the applicant has a single mother parent then fathers’ name is not mandatory to mention in the application form of PAN
Whoever pays Income tax in India, PAN is their identification number that is assigned to these taxpayers. If you want to open a bank account or filing the Income-tax returns then PAN is required.
Well, PAN card is regulated under Section 139A Income Tax Act and is issued by the Indian Income Tax Department which is supervised by the Central Board for Direct Taxes (CBDT). There are certain cases where PAN is mandatory that include opening a Bank Account, receive taxable salary or professional fees, sale or purchase of assets beyond the specified limits etc, mainly transactions of immense value.
Unique PAN number is assigned to every individual and once generated, is valid for lifetime and throughout India. One of the highlighting features of the PAN card is that it is not affected by the change of address.
Structure of PAN
- If you look at the PAN card you will see a pattern like AAAPL 1234C: First five characters are the alphabet, the next four characters are numerical and the last character is a letter.
- First three characters of the PAN number range from AAA to ZZZ and the fourth one tells about the PAN card holder. The fourth character is assigned in accordance with the list shown below-
- Association of persons (AOP)
- The body of Individuals (BOI)
H- HUF (Hindu undivided family)
L- Local Authority
J- Artificial Juridical Person
P- Individual (PROPRIETOR)
T- Trust (AOP)
- LLP (Limited Liability Partnership)
- The fifth character of the PAN is the first character of the following-
- When you have a personal PAN card, having a fourth character as P will have a fifth character of the persons’ surname or last name
- If you have an Entity, trust, society, or organization in the case of Company/ HUF/ Firm/ AOP/ Trust/ BOI/ Local Authority/ Artificial Judicial Person/ Govt will have a fifth character as ‘’C’’, “H”, “F”, “A”, “T”, “B”, “L”, “J”, “G” respectively.
- The last character of the PAN is generated in order to use it as a verification of the validity of that present code.
Where PAN can be used?
There are certain areas where PAN is mandatory or can be used. The list of areas where PAN can be used is shown below-
- Filing Income Tax returns
- Tax deduction at source
- Any work related to the income tax department
- Opening a Bank account
- New landline telephone connection/ mobile bill connection
- Purchase of foreign currency
- Bank deposits above Rs. 50,000
- Purchase and sale of immovable properties, vehicles etc
We at war advisors think that making the mention of the father’s name in case of single parents optional is a positive step introduced through the PAN card rules.
For more information please contact swaritadvisors.