PAN Card and Income Tax

PAN Cards enable the Income Tax authorities to estimate the overall tax generated in India. As such, it also aids in determining the rate of tax to be applied to various income classes. The Income Tax Department of India relies on PAN to track the financial transactions of all individuals, and based on the information, they calculate the rate at which you must be taxed. Following are the benefits afforded by PAN cards to the Income Tax Department of India:

  • It is used as a proof of identity as it includes the holder’s name, address and photograph.
  • It enables the department to determine the tax slab applicable to each individual. Individuals without PAN cards will be subject to 20% tax regardless of which bracket they fall under.
  • It makes it easier for authorities to track the income earned by individuals and apply the associated taxes in accordance.
  • Since PAN numbers are unique to each PAN Card holder, there will be no concerns of misuse even if you lose the card, or if you have a change in name or address.

Reasons Why PAN Card is Essential for Income Tax

6 reasons why a PAN card is essential when it comes to tax are listed below.

PAN Card for Filing Income Tax Returns - A PAN card is a necessity to file your Income Tax returns, since the government uses the PAN card to identify an individual or entity from a taxation point of view. The PAN card number has to be quoted when filing Income Tax returns by individuals and entities, failing which the individual or entity’s Income Tax returns will not be acknowledged and the government will assume the said individual has not paid his/her taxes.

PAN Card to File Income Tax Refund Individuals and entities who are eligible for Income tax refunds after the payment of their taxes will have to quote their PAN card number in their application form. The PAN has to be quoted as the government uses it as the only means of identification in taxation related activities. Failure to quote the PAN in such an application will result in the application not being processed and the individual/entity will not receive the refund.

PAN Number to Check Income Tax refund Status After filing the Income Tax refund application, taxpayers can check the status of their refund on the government portal. This status can be checked only upon entering the PAN card number of the individual/entity.

PAN for Filing TDS Certificates TDS (Tax Deducted at Source) is a tax collection method implemented by the government of India by which the tax amount is deducted at the time of disbursing the amount to the individual. Companies, traders or any entities that deduct TDS are required to furnish a TDS certificate stating the amount of tax that has been deducted. The TDS certificate has to also contain the PAN number of the payee in all documents such as TDS Returns, statement of perquisites and profits in lieu of salary.

PAN Number to log in to the Income Tax Website Taxpayers who wish to log in to the Income Tax website for the purpose of e-filing their returns are required to enter their PAN numbers. As the Income tax Department is moving towards a paperless income tax return filing system, taxpayers will have to file their returns through the website, where registration requires their PAN numbers.

PAN Card to avoid being overtaxed Individuals who submit their PAN card details at the time of filing their returns will avoid being over taxed, as the government will have a history of their transactions and accordingly calculate tax after considering deductions. For individuals and entities who do not quote their PAN numbers, however, the government will levy a flat 30% tax irrespective of the tax slab the individual or entity comes under. Thus, having a PAN card will help the individual avoid paying more than he/she is required to.

You can also check your PAN details online through ‘Know Your PAN’