Regulatory & Tax

PAN

Permanent Account Number — 10-character alphanumeric ID issued by Income Tax Department, used as universal taxpayer ID.

PAN is mandatory for: filing income tax returns, opening bank accounts, transactions above ₹50,000, GST registration, business operation, real estate purchases above ₹10L, and most B2B contracts.

The 10 characters encode information: positions 1-3 are sequential, position 4 is the entity type (P=individual, C=company, F=firm, H=HUF), position 5 is the first letter of surname/entity, positions 6-9 are sequential, position 10 is the check digit. So `AAACR5055K` is a Company.

For Indian SMBs, PAN is the foundation document — every other registration (GST, Udyam, Shop Act, FSSAI) requires PAN. Without it, no formal business is possible.

India context

Linking PAN with Aadhaar (mandatory since 2023) is the most-missed compliance for older SMBs. Unlinked PANs become inoperative — meaning you can't file ITR, can't claim TDS refunds, and your bank account gets flagged. Always check link status annually.

Examples

  • A salon proprietor uses their personal PAN for the business; entity type 'P'.
  • A registered Pvt Ltd company gets a separate Company PAN; entity type 'C'.

FAQ

Is PAN-Aadhaar linking still mandatory?

Yes. Unlinked PANs are inoperative — they can't be used for ITR or TDS refund. Link via incometax.gov.in (₹1000 fee for late linking).

Can a business have multiple PANs?

No — one PAN per entity. Multiple PANs invite penalty under Section 272B (₹10,000).

What's the difference between PAN and TAN?

PAN identifies the taxpayer. TAN (Tax Deduction Account Number) identifies entities that deduct tax at source (TDS). A business may need both.

Related concepts

GSTINTANITRAadhaarTDS

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Related glossary entries

GSTIN — Goods and Services Tax Identification Number — a 15-character ID assigned to every GST-registered business in India.TDS — Tax Deducted at Source — mechanism where the payer deducts income tax before paying the recipient, then deposits with the government.TAN (Tax Deduction Account Number) — 10-character alphanumeric ID required for any business deducting Tax at Source (TDS) — separate from PAN.

More in Regulatory & Tax

DPDP ActGSTINGSTR-1GSTR-3BRCM (Reverse Charge Mechanism)ITC (Input Tax Credit)RERAFSSAI
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