In India, a permanent account number (PAN) is a 10-digit alphanumeric identity allotted by the Indian Income Tax Authorities to every tax-paying entity and to individuals, including foreign nationals, who want to invest or do business in India.
The tax department uses the number, issued in the form of a card, as a universal identification key to track financial transactions that might have a taxable component to prevent tax evasion and support compliance of applicable tax laws.
PAN also serves as a valuable means of photo identification for individuals, and is accepted by all government and non-government authorities in the country.
Though it is optional and voluntary to obtain a PAN, one must apply for it, as a PAN is mandatory for every transaction with the income tax department and almost all high-value financial transactions, including the opening of a bank account, receiving taxable income or professional salary, and buying or selling assets above specified limits, among others.
All foreign directors or responsible persons engaged by the Indian subsidiary of a foreign-invested business must register for a PAN if they wish to operate their company accounts, regardless of whether they are based in India.
Indian income tax law mandates the following categories of individuals to apply for a PAN:
- Every person whose total income exceeds the maximum amount not chargeable to tax
- A person who is liable to pay the service tax and his or her agent
- Every person who carries on any business or profession whose total turnover or gross receipts exceed the threshold limit in a year
- Any person required to a file a return of income
- Every importer and exporter who is required to obtain an import export code
- Every importer and exporter who is intending to get registered as a manufacturer, trader, or service provider in India
- Every person who intends to enter into specified financial transactions in which a PAN is mandatory
Transactions Where PAN Is Mandatory
For the following transactions, it is mandatory for every person to provide a PAN, except government offices:
- Sale or purchase of immovable property valued at Rupees (Rs) 1,000,000 (US$14,056) or more, the PAN should be disclosed in the document pertaining to the purchase or sale of the property
- Sale or purchase of a motor vehicle requiring registration other than two-wheelers
- Cash payment of Rs 50,000 (US$703) or more per day for the purchase of bank drafts, pay orders, or bankers’ checks during any one day
- Cash payment exceeding Rs 50,000 (US$703) at a time in connection with travel to any foreign country (fare or purchase of foreign currency)
- Cash payment to hotels and restaurants against bills exceeding Rs 50,000 (US$703) at any one time
- Opening a bank account
- Application for issuance of a credit or debit card
- Cash deposits of Rs 50,000 (US$703) or more with any bank during any one day
- Payment of Rs 50,000 (US$703) or more to a mutual fund for purchase of units, to a company for acquiring its shares, to a company/institution for acquiring its debentures/bonds, or to the Reserve Bank of India for acquiring bonds
- Life insurance premiums exceeding Rs 50,000 (US$703) a year
- Purchase/sale of any goods or services (including jewelry) exceeding Rs 200,000 (US$2,811) per transaction
Any person who does not have a PAN and is involved in any of the above transactions must declare such transaction on Form No. 60, as provided on India’s income tax department website.
Furthermore, it is important to note that foreign nationals are exempt from furnishing a PAN for some of the transactions referred above.
Application Procedure
Applicants seeking a PAN for the first time must complete one of the following forms, available on India’s income tax department website:
- Form 49A for Indian citizens, whether the current residence is in India or not
- Form 49AA for foreign nationals
The forms require basic information such as name, address (both permanent and official), contact number, valid email address, father’s name, and date of birth.
Aside from the application form, applicants must provide an acknowledgment form, along with two photographs, and other documents.
The requirement for documents differs regionally and depends on the applicant’s citizenship status.
Documents Required for PAN Application—Individuals
For identification, applicants must furnish a copy of one of the following documents:
- Passport
- Voter identity card
- Driving license
- Aadhaar card (issued by unique identification authority of India)
- Bank certificate on original letterhead of the bank’s branch, along with the applicant’s photograph and bank account number
For proof of residence, a copy of one of the following is required:
- Passport
- Voter identity card
- Driving license
- Aadhaar card
- Bank account statement or passbook
- Credit card
- Water and electricity bill
- Ration card
- Employer certificate
- Matriculation certificate
Specific Requirements for Foreign Nationals
For foreign nationals, the address for an individual foreign national and a copy of the following documents must be notarized and apostilled by the Indian Embassy in their home country:
- Passport
- Person of Indian Origin Card issued by Government of India
- Overseas Citizen of India card issued by Government of India
- Other national or citizenship identification number or taxpayer identification number
- Bank account statement in the country of residence
- Driving license
- A registration certificate issued by the foreigner’s registration office showing an Indian address
- Visa granted and the appointment letter or contract from the Indian company, and the original certificate of Indian address issued by the employer
Documents Required for PAN Application—Corporations
- Copy of certificate of registration incorporated in India.
Specific requirements for foreign-invested corporations:
- Copy of Certificate of Registration issued in the country where the applicant is located, duly apostilled by that country’s Indian embassy or high commission.
- Copy of the registration certificate issued in India or of approval granted to set up an office in India by the Indian authorities.
Editor’s Note: This article was first published in August 2013 and was updated on February 14, 2019, to incorporate the latest regulations.
This article was first published on India Briefing.
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