Permanent Account Number (PAN) is a ten-digit alphanumeric number (typically AAAPA1234A), by the Income Tax Department, to any "person" who applies for it or to whom the department allots the number without an application (ITD).
Since its evolution, PAN was introduced to make it easier to link various documents of an assessee, such as tax payments, assessments, tax demands, tax arrears, etc.
The PAN helps income tax regulatory authorities detect and combat tax evasion by assessees and broaden the tax base. It has also made it easier to retrieve and match information about investments, loan raising, and other business activities of taxpayers gathered from various internal and external sources.
If you have PAN, then all your transactions can be linked to PAN. These transactions may include tax payments, TDS/TCS credits, income returns and so forth.
PAN innovations in India have continued to evolve in 2024, especially in the areas of compliance, integration with other digital systems, and the growth of its use in a variety of industries.
For a quick guide on PAN information, you can visit this link. |
The following are some significant PAN developments as of 2024:
PAN 2.0
The "PAN 2.0 - a digital leap in taxpayer services”, is an initiative that marks a significant enhancement in India's tax administration system. It aims to digitise and streamline the process of PAN application, issuance, and management, making it more accessible and efficient. Key features of the upgraded system include faster PAN issuance (now available in real-time in some cases), seamless integration with Aadhaar, and advanced security measures like biometric verification and encryption to safeguard taxpayer data. The digitised process facilitates easier linking with financial and government services, improving tax compliance and transparency.
Additionally, PAN 2.0 supports greater automation, reducing manual errors and enhancing the accuracy of tax reporting and audits. With this initiative, the government aims to boost its digital economy and increase financial inclusion, catering to over 50 crore PAN holders in India, and improving services for both individuals and businesses alike.
PAN 2.0 vs Traditional PAN
According to PIB, the PAN 2.0 aims to integrate all PAN/TAN related services on a single unified portal of ITD, allowing for end-to-end services like allotment, updation, correction, Online PAN Verification (OPV), and more. This will replace the current three portals viz., e-Filing Portal, UTIITSL Portal and Protean e-Gov Portal for PAN/TAN related services. Additionally, taxpayer facilitation will be provided, with allotment/updation/correction of PAN being free and e-PAN sent to registered mail ID. For physical PAN cards, applicants need to pay Rs. 50 domestic fee and Rs 15 + India post charges for delivery outside India.
Facility of e-PAN
The Income Tax Department has introduced the facility of e-PAN card (electronic PAN). It is a digital version of the traditional PAN card, which can be used for financial and tax-related transactions. You can instantly obtain an e-PAN card by applying online keeping in consideration the following conditions. Check this image below:
You must also know that as per the provisions of Section 139A of the Income Tax Act, 1961, you should not possess more than one PAN and as per Section 272B (1). If you fail to comply with the provisions of section 139A i.e. if you possess more than one PAN, it will attract a penalty of Rs. 10,000.
| For the application of e-PAN, follow these steps. If you wish to surrender a duplicate PAN, you may refer to this. |
Mandatory PAN Linking for Financial Transactions
- PAN-Aadhaar Linking: The Indian government has emphasized the need to link PAN with Aadhaar to ensure seamless tax filing, identity verification, and fraud prevention. The deadline for PAN-Aadhaar linking was extended multiple times, lately up to 31st December 2024. The government has introduced PAN 2.0 for more seamless services.
- Bank Account and Demat Account Linking: The PAN is required to be linked with bank accounts and Demat accounts. A significant portion of India's population is now using PAN-linked accounts for digital payments, making it an essential tool in the financial ecosystem. As per the Reserve Bank of India (RBI), over 80 crore (800 million) bank accounts have been linked to PAN.
Tax Filing and PAN Integration
- E-Filing and AI-driven Tax Compliance: PAN continues to be a central requirement for e-filing Income Tax Returns (ITRs) in India. In 2024, the majority of individual income tax returns were filed electronically, with a significant portion of these filings requiring PAN for tax assessment and verification.
- Advanced Analytics and Data Matching: The Income Tax Department has also used AI-driven tools to track discrepancies in financial reporting. PAN plays a critical role in these automated systems, which match income, investments, and tax payments with declared returns. The government has increasingly relied on data analytics and machine learning to identify tax evaders and non-compliant taxpayers.
PAN and Demat
As of 2024, linking your Demat account to your Permanent Account Number (PAN) remains a crucial requirement for all investors in India. The process can be completed through your Depository Participant (DP) or via online platforms, and the PAN details must match those in your Demat account for successful verification.
PAN for Cryptocurrency Regulation
The Indian government has mandated KYC by Aadhaar and PAN for cryptocurrency investors and traders. As of 2024, all major crypto exchanges like WazirX, CoinDCX, and ZebPay require users to submit their PAN during registration and trading activities. This is in line with Global Anti-Money Laundering (AML) standards. According to the Ministry of Finance, transactions exceeding INR 10,000 must be reported, with PAN required for any significant transactions in cryptocurrencies.
PAN for Non-Residents (NRIs) and Foreigners
- Simplified Application Process: The government introduced a more streamlined process for NRIs and foreigners to obtain a PAN. The procedure has become fully online and allows for Aadhaar-based verification in some cases, reducing paperwork and wait times.
| For an online application, click here. |
- Tax Filing for NRIs: NRIs with income in India are required to use PAN for income tax filings, property transactions, and investments. As per the Income Tax Department's latest data, nearly 5 million NRIs are registered in the Indian tax system, contributing significantly to PAN usage.
PAN for Digital Transactions and E-Commerce
In 2024, e-commerce platforms like Amazon, Flipkart, and Snapdeal required sellers to provide PAN details for tax purposes. PAN is also needed for GST registration and for tracking GST payments, with the GSTN (Goods and Services Tax Network) relying heavily on PAN for verifying business transactions.
Furthermore, according to the National Payments Corporation of India (NPCI), over 5 billion transactions per month are processed through UPI (Unified Payments Interface), and a large number of these transactions are tied to PAN for compliance purposes.
PAN for MSMEs (Micro, Small, and Medium Enterprises)
The Ministry of MSME has also worked with the Income Tax Department to simplify PAN registration and verification for small businesses. In 2024, approximately 60 million MSMEs used PAN for tax reporting, accessing government schemes, and registering for GST.
Corporate PAN Guidelines
Companies and LLPs (Limited Liability Partnerships) are required to furnish their PAN for corporate filings, including annual returns and tax filings. As of 2024, India has over 1.5 million active companies, all of which are required to provide PAN during compliance reporting.
Besides, under the Foreign Exchange Management Act (FEMA), PAN is required for foreign companies investing in India. This regulation ensures that all financial flows through the Indian market are traceable for tax purposes.
Security Features and Technology
The Indian government has introduced advanced security features to PAN cards, including QR codes and biometric authentication. In addition to regular updates, blockchain technology is being explored for securing PAN-related data against fraud.
Likewise, the Department of Revenue under the Ministry of Finance has issued new guidelines to protect PAN card data and the Central Board of Direct Taxes (CBDT) has worked on improving data encryption and access control measures.
Global Tax Compliance and PAN
PAN has become a key element in the FATCA and CRS frameworks, where India reports financial information of its citizens to foreign tax authorities. The PAN is used to track international investments, assets, and incomes, ensuring transparency in cross-border tax compliance.
India is part of the OECD’s Common Reporting Standard (CRS), which mandates global financial institutions to report PAN-linked account details. This framework is increasingly being used to curb tax evasion and improve global financial transparency.
PAN for Loans and Credit
PAN is also mandatory for individuals and businesses when applying for loans, including personal loans, home loans, and business loans. Financial institutions require PAN details for verifying the borrower’s creditworthiness.
PAN is central to the Credit Information Bureau (CIBIL) score generation, and most lending institutions assess PAN data when determining an individual's credit score and loan eligibility.
Conclusion
To sum up, an essential component of India's tax and financial systems, the Permanent Account Number (PAN) guarantees the accountability, transparency, and traceability of financial activities. The evolving nature of PAN, with its increasing integration into digital platforms and broader regulatory frameworks, reflects India's commitment for enhancing financial transparency and streamlining tax compliance in a rapidly digitising economy. For instance, the introduction of PAN 2.0 is the landmark development of 2024. Moreover, being a unique identifier, PAN is indispensable for individuals, companies, and foreign entities to engage in formal economic activities while adhering to India's regulatory framework. For example, as of 2024, the PAN itself will be used as a Common Business Identifier.
Also Read:
Your Comprehensive Guide to PAN Card Services: Apply, Check Status, Download, and More
Minor PAN Card: A Complete Guide for Application
PAN for Everyone: Application Processes for Individuals, Minors, NRIs, HUFs and Trusts
Your Comprehensive Guide to PAN Card Services: Apply, Check Status, Download, and More
Uses of PAN Card: Essential Guide for Financial Transactions
Written by Bruhadeeswaran R.
