As per Section 139 AA (2) of the Income Tax Act, every individual who has a PAN card as of 1st July 2017 will find their card to be inoperative if it is not linked with their Aadhaar card by the end of FY.2019. This deadline of linking your PAN details with Aadhar has been extended multiple times which shows how vital the Permanent Account Number is for any individual.
Initially, PAN was used for taxation purposes as mandated by the Central Board of Direct Taxes. Now, the benefits of PAN card is not limited to use for identity verification but also authentication of various types of financial transactions.
Why is a PAN card important?
PAN card is considered as one of the essential KYC documents. This unique number is required to be produced during several cases such as –
- High-value financial transactions
For any kind of purchase or sale of an immovable item valued at a high price, PAN details are required to be issued to facilitate such a transaction.
- Create a bank account
The most common use of PAN card is during the creation of a new bank account. Usually, all financial institutions in India require applicants to provide their PAN details to meet the demands of the eligibility criteria for opening any type of account.
Moreover, if you need to avail a loan from your desired lending organisation, it is mandatory to provide your PAN card along with other KYC documents for identity verification.
- Cash payments more than Rs.50,000
For any cash payment higher than Rs.50,000, both parties need to provide their PAN details. For example, such transactions include –
- A bill generated by hotels, restaurants, lodges, services, etc.
- Expenses incurred on travels, obtaining foreign exchange, etc.
- A cash deposit of Rs.50,000 or above in a savings account.
- Cheques, demand drafts, etc. issued which amounts to Rs.50,000 or above.
- Calculation of Taxes
Another purpose of PAN card is visible extensively in the calculation of taxes. If you are unable to provide your PAN details while filing your annual tax returns, the Income Tax Department may charge a higher tax rate on your total annual income as a penalty fee.
You can also witness the importance of PAN card while investing substantial amounts in mutual funds, bonds, debentures, etc. Moreover, you are also required to provide your PAN details for opening a Demat account.
Not only Indian citizens but NRIs can also avail the benefit of PAN card for their verification purposes. Hence, such widespread uses of this card make it an essential KYC document for every individual.
However, theft or misplacement of PAN card can lead to severe problems and complicated reprint application procedures, making it difficult to avail the benefits of PAN. Such complex measures can be avoided with the purchase of a card protection plan beforehand, offered by leading insurance aggregators.
Individuals usually carry PAN cards along with other cards in their wallet which, when stolen, can make you vulnerable to fraudulent activities done under your name. In order to receive monetary reimbursement in such a scenario, it is advised to avail an identity theft insurance cover.
For further financial security against unforeseen incidents, you can also purchase a purse care plan which offers the facility of instant blocking of all your payment cards, alongside reimbursement of PAN re-issuance fee.
With the help of such insurance plans in place, you can lower your financial risk in case of unanticipated events and carry your essential cards during your travels and reap the benefits of PAN cards.