What is PAN Used for and Where? If You Are New, Know This

March 30, 2025 By: Naresh Saini

Permanent Account Number (PAN) is an essential document issued by the Income Tax Department of India. It is a 10-digit alphanumeric number assigned to individuals, businesses, and entities to track financial transactions and prevent tax evasion. Whether you are new to financial management or just got your PAN card, understanding its uses is crucial.

Why is PAN Important?

PAN serves as a unique identifier that ensures financial transparency. It is mandatory for various financial and non-financial transactions. Without a PAN, many banking and investment activities cannot be carried out legally.

Where is PAN Required?

1. Income Tax-Related Activities

PAN is primarily used for income tax-related transactions. The government tracks financial records through PAN to ensure proper taxation.

• Filing Income Tax Returns (ITR) – Any individual or business earning taxable income must link their PAN while filing returns.
• Receiving Tax Refunds – If you have paid excess tax, refunds are processed through your PAN.
• Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) – If your PAN is not provided, higher TDS rates may be deducted.

2. Banking Transactions

Banks require PAN for various financial operations to comply with anti-money laundering laws.

• Opening a Bank Account – Whether it is a savings or current account, PAN is mandatory.
• Depositing Cash Above ₹50,000 – Any cash deposit exceeding this limit in a single day requires PAN.
• Applying for Loans and Credit Cards – Financial institutions use PAN to assess credit history before approving loans or credit cards.
• Fixed Deposits Above ₹50,000 – Banks require PAN for high-value fixed deposits to track tax implications.

3. Investments and Financial Markets

If you are planning to invest, PAN is essential for compliance.

• Buying or Selling Stocks and Mutual Funds – A PAN is required to open a Demat account and trade in shares or mutual funds.
• Purchasing Bonds and Debentures – Investment in bonds exceeding ₹50,000 needs PAN verification.
• Insurance Premium Payments Above ₹50,000 Per Year – To ensure proper financial tracking, insurers require PAN details for high-value policies.

4. Property and Real Estate Transactions

Property transactions involve significant financial exchanges, making PAN mandatory.

• Buying or Selling Property Above ₹10 Lakh – To prevent black money transactions, PAN must be mentioned in sale deeds.
• Rent Payments Above ₹50,000 Per Month – If you are paying rent over ₹50,000, you must report your landlord’s PAN to claim tax benefits.

5. Business and Professional Use

PAN is a key requirement for businesses and self-employed individuals.

• Business Registration – Companies, LLPs, and sole proprietorships must register their PAN with tax authorities.
• GST Registration – Businesses must link PAN to their GST number for tax compliance.
• Foreign Transactions – If your business deals with international clients, PAN is needed for foreign remittances.

6. Buying and Selling Vehicles

PAN is required for purchasing high-value vehicles.

• Buying Cars and Two-Wheelers Above ₹10 Lakh – Automobile dealers need your PAN for documentation.
• High-Value Vehicle Loans – Banks require PAN while processing car loans above ₹50,000.

7. Applying for Passports and Travel Bookings

PAN is needed for travel-related financial transactions.

• Foreign Travel Bookings Above ₹50,000 – Hotels, airlines, and travel agencies ask for PAN in such cases.
• Applying for a Passport – Some passport applications may require PAN for verification.

8. Jewelry and Luxury Purchases

PAN is required when making high-value purchases.

• Buying Jewelry Above ₹2 Lakh – To track large transactions and prevent tax evasion, PAN is required.
• Purchasing Luxury Goods Above ₹5 Lakh – Many stores ask for PAN to maintain records of expensive purchases.

9. Mobile and Utility Connections

• Getting a Postpaid Mobile Connection – Telecom operators may require PAN as an identity proof.
• Applying for Electricity and Gas Connections – Some providers request PAN for verification in high-value installations.

How to Apply for a PAN Card?

If you don’t have a PAN card, you can apply through the NSDL or UTIITSL websites. The process is straightforward:

1. Visit the Official Website – Go to the NSDL (https://www.onlineservices.nsdl.com/) or UTIITSL (https://www.utiitsl.com/) website.
2. Choose the PAN Application Form – Select Form 49A for Indian citizens or Form 49AA for foreign nationals.
3. Fill in the Required Details – Provide personal information, contact details, and a valid address.
4. Submit Documents – Attach identity proof (Aadhaar, passport), address proof, and a passport-size photograph.
5. Make Payment – Pay the processing fee online.
6. Receive Your PAN – Once processed, you will receive your PAN card via post within a few weeks.

Is PAN Safe to Share?

While PAN is an important document, you must be cautious while sharing it. Only share PAN details with trusted entities such as banks, tax officials, and registered service providers. Avoid sharing PAN over unsecured platforms to prevent fraud.