How Your PAN Card Simplifies Financial Transactions in India

A Permanent Account Number (PAN) card is an important financial document issued by the Income Tax Department in India. It has become mandatory for all major financial transactions in the country. This 10-digit alpha-numeric identification helps the tax department track all high-value transactions made by an individual. 

Let’s look at the use of PAN card in smooth financial dealings.

Importance of PAN Card

A PAN card is a significant proof of identification and helps the government maintain transparency in all economic transactions. Whether you plan to open a bank account, make investments, buy property, apply for loans, or file tax returns – you will need a PAN card almost everywhere. It enables easy tracing and tracking of financial transactions to prevent tax evasion. Therefore, having a PAN card should be the first step towards responsible money management.

PAN Card for Income Tax Purposes

1. Filing Income Tax Returns (ITR)

It is mandatory for all taxpayers in India, including NRIs, to quote their PAN while filing income tax returns, irrespective of their income levels. The process becomes faster and uncomplicated when your PAN is linked to Aadhar, and the PAN Aadhaar link status is active. 

2. Avoiding Higher Tax Deduction Rates

If you do not submit your PAN to banks and other financial institutions, they may deduct TDS at higher rates of 20% as per Section 206AA. Furnishing PAN ensures tax deduction at the prescribed lower rates.

3. Penalties for Non-Compliance

You can sometimes attract penalties like late filing fees and even prosecution if you do not file tax returns or furnish incorrect information despite having a PAN. The tax department can also charge penalties for willful tax evasion when detected. Therefore, it is better to remain compliant by dutifully fulfilling all tax obligations.

PAN Card for Banking Transactions

You need to submit your PAN for all major banking transactions:

1. Opening Bank Accounts

PAN is essential for opening all types of bank accounts like savings accounts, current accounts, fixed and recurring deposits exceeding ₹50,000 in a year.

2. High-Value Cash Transactions 

All cash deposits and withdrawals of ₹50,000 or more into bank accounts in a day require PAN submission per RBI guidelines.

3. Loans and Credit Cards

All credit facilities, such as personal loans, home loans, vehicle loans, credit cards, etc., require PAN as identity proof during application.

4. Tracking Interest Income

Banks can trace interest incomes on deposits through PANs for TDS compliance when due.

PAN Card for Investments 

PAN Card is crucial for all substantial investments like:

• Demat Account Opening for stock market investments
• Purchasing mutual funds exceeding ₹50,000
• Buying bonds, debentures over ₹2 lakhs
• Making gold investments in excess of ₹2 lakhs

It assists the related agencies in maintaining records of all high-value investments for tracking incomes and ensuring tax compliance.

PAN Card for Property Transactions

PAN Card is essential for the following property deals:

• Buying and selling property valued over ₹10 lakhs
• Ensuring capital gains tax on property sale
• Rental agreements exceeding ₹1 lakh per annum
• Home loan applications for property purchases

It enables tracking of tax liabilities on substantial property transactions by allowing linkage between properties and owners.

PAN Card for Business Activities

• Filing mandatory business income tax returns
• Opening current accounts for businesses
• Obtaining GST registration
• Availing input tax credits seamlessly
• Generating E-way bills for inter-state transport of goods
• Facilitating payment of GST and tracking of business transactions

Benefits of Using a PAN Card

Having a PAN Card makes financial transactions seamless, transparent, and tax-compliant. Some significant benefits include:

1. Simplifies Overall Tax Filing Process

Having a PAN makes the entire income tax return filing process much easier. All your financial transactions are linked to your PAN. So when you have to file your returns, the tax department can automatically pull all the required information like your bank interest, income from investments, capital gains, etc., if your PAN is seeded with them. You don't have to struggle to gather all the documentary proofs. The whole tax filing is very convenient compared to when PAN was not mandatory.

2. Prevents Higher Tax Deduction at Source

If you have not furnished your PAN to your bank or any other income source, they are bound to deduct TDS at a higher rate of 20% as per the rules. This higher deduction rate applies even if you fall into a lower income tax slab of 5% or 10%. It leads to cash flow issues unless you file returns and reclaim refunds. However, sharing your PAN ensures only the exact TDS amount applicable to your income slab is cut. This avoids financial hassles.

3. Enhances Visibility on High-Value Transactions

Since all major investments, property deals, etc., require PAN disclosure, the Income Tax department can easily track the financial position of all citizens. This visibility on high-value transactions enhances transparency, prevents benami deals, and improves overall compliance.

4. Facilitates Faster Access to Credit and Loans

Whether you apply for a personal loan, housing loan, or even a credit card, the PAN is now mandatory. If the PAN is provided, financial institutions can easily verify applicant details online. This reduces their risk and enables faster decision-making processing through digitisation. Less physical paperwork also means quicker loan disbursal.

5. Promotes Financial Discipline

PAN seeding with Aadhaar will help curb practices like multiple PAN cards by a single person to divert incomes and evade taxes. This promotion of financial transparency and discipline will stand all citizens in good stead when availing loans or conducting property registrations by enhancing their creditworthiness and trust quotient.

Conclusion

A PAN Card has become indispensable for all important monetary dealings for individuals and businesses. It not only eases processes but also enables compliance, discipline, and transparency in handling finances responsibly. One must apply for this 10-digit alpha-numeric identification as soon as possible to avoid hassles in important financial transactions while also contributing to nation-building by sincerely paying due taxes.

Written by Bruhadeeswaran R.

Bruhadeeswaran R. is a B2B content expert with 14+ years of experience, specializing in National Pension System (NPS), PAN, DPI, eSignPro, and Central KYC. As Editor and Lead Content Writer at Protean eGov Technologies, he simplifies complex e-governance topics through engaging blogs, reports, and digital content.