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Why PAN Is Mandatory To File Your IT Return?

A PAN is provided by the Income Tax Department of India, which consists of 10-character alphanumeric digits which is the unique PAN number allotted to every eligible individual. PAN is also required for filing income tax returns and for carrying out financial transactions. The main purpose of the PAN card is to use an universal identification card to monitor financial transactions that may have a taxable aspect to avoid tax. The PAN number remains unchanged by a change of address across India and also serves as an important proof of identification for an individual.

Eligibility required to apply for PAN

  • Individuals receiving taxable income in India, except foreign nationals paying taxes throughout India.
  • Anyone who conducts a business (whether retail, services or consulting) with net revenue, turnover or net cash in excess of Rs 5 lakh in the previous financial year.

Why PAN is mandatory to file an Income Tax Return?

Use of PAN to file Income Tax Return: A PAN card is a prerequisite to submit your income tax returns, as the government utilizes the PAN card to recognize an individual or entity from a tax perspective. The PAN card number must be recorded while filing income tax returns for individuals and entities, unless the person or entity’s income tax returns are not recognized and the government believes that the individual has not incurred his or her tax.

Use of PAN to file Income Tax Refund: Citizens and entities liable for income tax deductions after paying their taxes will be asked to cite their PAN card number in their application process. The PAN must be cited as the only form of recognition used by the government in tax related operations. Malfunction to cite the PAN in such an application will lead to the request not being approved and the individual/entity will not be refunded.

Use of PAN to track IT return status: Taxpayers should monitor the status of their refund on the government page. By entering the individual/entity PAN card number after the claim for income tax refund has been filed one can check his or her IT return status.

Use of PAN to file TDS certificates: TDS i.e. Tax Deducted at Source form of tax collection introduced by the Government of India by which the amount of the tax is withheld at the time the amount is charged to the respective taxpayer. Businesses, traders or any organization that subtracts TDS are supposed to have a TDS certificate specifying the amount of tax that has been withheld. A TDS certificate must also include the PAN number of the payee in all records, such as the TDS refund, the perquisite declaration and the income in favor of salary.

PAN Card for not be overtaxed: Taxpayers who do not want to be overtaxed can submit their PAN specifics at the time of filing their returns. since the government will have a database of their expenses and will only measure tax without evaluating exemptions. That being said, for individuals and organisations who do not cite their PAN numbers, the government will charge a flat tax of 30 per cent irrespective of the tax leaf to which the individual or entity is subject. Thus, having a PAN card lets the user from paying more than he/she wants to.

In case you have multiple PAN Cards: As per the guidelines, having multiple PAN cards under your name is an offense. A liability of Rs.10,000 will be imposed under Section 272B of the Income Tax Act if it is found to have multiple PANs. In case you have more than one PAN, it’s best to give it up instantly.   

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