Permanent Account Number or PAN, as it is commonly called, is a means of identifying various taxpayers in the country. PAN is a unique identification number assigned to Indians, mostly to those who pay tax. The PAN system of identification is a computer-based system that assigns unique identification number to every Indian tax paying entity. Through this method, all tax related information for a person is recorded against a single PAN number which acts as the primary key for storage of information. This is shared across the country and hence no two people on tax paying entities can have the same PAN.
The idea behind PAN is similar to the Social Security Number or SSN used in the United States. SSN in the US is a unique nine-digit number issued to all citizens of the US, permanent and temporary both. Although, the primary aim for SSN creation was to track individuals for social security purposes, it has now become a primary identification number for taxation processes.
Any PAN issued is valid for the entire lifetime of the PAN holder. This is so majorly because PAN is unaffected by any change of address of the PAN cardholder.
Types of PAN Cards
The Income tax Department has mandated that all tax paying entities register and possess a PAN card. While this applies to individuals, companies, partnership firms, NGO’s as well as foreign firms also come under the purview of this directive.
As a result, PAN cards are issued for individuals as well as companies.
PAN Card for Individuals
A PAN card for individuals is used to keep track and link all financial transactions that attract tax, with the IT department calculating the total taxable amount due on the basis of this data.
PAN Card for Companies
A PAN card for organisations is similar to that for individuals, with the exception that there is no photograph on the physical PAN card. Also in lieu of the date of birth mentioned on individual PAN cards, the date of registration of the company/organisation is mentioned.
PAN for foreign citizens in India
All foreign citizens who wish to carry out business in India are required to obtain PAN. The procedure for doing so is same as applicable to resident Indians. However, the application form for foreigners is form 49AA . All entities that are eligible to obtain PAN as Indian citizens are also eligible to obtain PAN as foreign citizens. This list includes entities like HUFs, individuals, trusts and so on.
The IT Department calculates the amount of tax the company/organisation is required to pay through its various transactions, all of which now require quoting the PAN card.