The card was issued in order to prevent tax evasion by individuals and entities as it links all financial transactions made by a particular individual or entity. In this way, the Income Tax Department has a detailed record of all major transactions for tax purposes.
Indian citizens who are residents of the country as well as NRI (Non Resident Indians), OCI (Overseas Citizen of India) cardholders, PIO’s (Person of Indian Origin) as well as foreigners who come under the purview of the Income Tax Act of 1961 are eligible to apply for a PAN card. Firms and companies, governments and minors too can apply for a PAN card.
However, the PAN card also has many other uses besides just being a way for the Income Tax department to keep tabs on your financial dealings.
The Uses of PAN Card are given below:
IT Returns Filing: All individuals and entities who are eligible for Income tax are expected to file their IT returns. A PAN card is necessary for filing of IT returns, and is the primary reason individuals as well as other entities apply for one.
Opening a bank account: A PAN card is required in order to open a new bank account, whether it is a savings or a current account. All banks, whether public, private or co-operative, require the submission of a PAN card in order to open an account with them.
Buying or selling a motor vehicle: If you wish to buy or sell a motor vehicle worth more than Rs. 5, 00, 000, you have to provide your PAN Card details when conducting the transaction.
Applying for a credit or debit card: When applying for either a debit card or a credit card at any bank or financial institution, furnishing your PAN card details is mandated by regulations. The bank will not issue the card if this criteria is not met.
Purchase of jewellery: If you are looking at buying any sort of jewellery that is valued at over Rs. 5, 00, 000, you will have to provide your PAN card details at the time of purchase.
Making investments: Investing in securities is seen as a good way to build your wealth. If you are considering investing in securities, you would have to furnish your PAN details for any transactions amounting to above Rs. 50, 000. This extends to equities, mutual funds, bonds as well as debentures.
Proof of Identity: a PAN card is accepted as valid proof of identity anywhere in the country, and is also considered as proof of age. It can also be used as proof of identity when making an application for a passport, voter ID card, driving licence, electricity connection etc.
Foreign Exchange: If you are travelling abroad and wish to convert your Indian currency into foreign currency, you are required to provide details of your PAN at the money exchange bureau/bank/institution where you are converting the money.
Property: Buying, selling or renting property in India now requires PAN card proof. In the case of buying of property, the PAN details of the buyer as well as the seller have to be listed on the sales deed and any other such documentation for the sale to be complete.
Loans: If you require to take out a loan, all loan providers, both banks as well as other lending institutions, require you to submit details of your PAN at the time of loan application. All loans, from education loans to personal loans require PAN details for the loan to be approved.
Fixed Deposits: If you plan on investing your money in a Fixed Deposit (FD) amounting to above Rs. 50, 000 in a bank, you will have to provide your PAN details. This is done as the bank will deduct TDS (Tax Deductible at Source) on the FD interest amount.
Cash Deposits: If you are making a cash deposit that amounts to over Rs. 50, 000 at a time, you will have to submit your PAN details as well. This is in keeping with the RBI mandate, which directs banks to report any large cash deposits to the RBI, as a way to prevent money laundering.
Telephone Connections: If you wish to get a new telephone or mobile phone connection, it is mandatory to submit your PAN details, as private cellular operators will not provide you a connection without it.
Insurance Payments: As per the Income Tax Department directives, PAN card details have to be furnished when making an insurance payment exceeding Rs. 50, 000 a year.
From the above, we see that a PAN card is required for a large number of activities, both financial as well as non-financial.