What is PAN number ?
Permanent Account Number (PAN) is issued by Income Tax department to a person who applies for it. PAN is a 10 digit unique alpha-numeric identity allotted to each tax payer by Income Tax Department under the supervision of Central Board of Direct Taxes.
It also serve as a identity proof. PAN is mandatory for financial transaction such as receiving taxable salary or professional fees, sale or purchase of assets above specified limits, buy mutual funds and more.
The primary objective of PAN is to use a universal identification key to track financial transaction that might have a taxable component to prevent tax evasion. The PAN number remains unaffected by change of address throughout India.
Here is what PAN card looks like:
What does the sequence in PAN number mean ?
Unlike credit cards or cheques, which have only numerical codes, PAN cards have a 10 digit alpha-numerical sequence. Let’s look into what each character of this sequence means:
- The first 3 Characters
Every PAN card’s first 3 characters represent an alphabetic series running from AAA to ZZZ.
2. The 4th character
This 4th character of a PAN number represents the status of a PAN holder, which can be any of the following:
- C- Company
- P- Person
- H- Hindu Undivided Family (HUF)
- F- Firm
- A- Association of Person (AOP)
- T- AOP (Trust)
- B- Body of individuals (BOI)
- L- Local Authority
- J- Artificial Judicial Person
- G- Government
So, The private individuals will have 4th character as P.
3. The 5th Character
The 5th character of a PAN number is the first letter of :
- The surname in case the status is ‘P’.
- or, the name of whatever Entity, Trust, Society, Organisation, HUF, etc.
- or, In all other cases ‘A’ is the 5th character
e.g. An individual with name Navratan Lal Gupta, The PAN number will have ‘G’ as a fifth character.
4. The 6th to 9th number
The next sequential numerals are sequentail numbers running from 0001 to 9999.
5. The 10th character
The last character is an alphabetic check digit which is generated by applying a formula to the preceding nine letters and numbers.
PS: With the arrival of a recent Goods and Services Tax (GST), two additional characters will be added at the tail of a PAN card number which represent originating states. This was heard in a news debate.
Sources: Business Today, Quora
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