What PAN Is
Chapter Eight
Syllabus topic 3, "PAN & TAN application for business Under The Income Tax Act, 1961."
Pages 15 to 17 of 80
Read this first: which Act
MU's topic line says "PAN & TAN application for business Under The Income Tax Act, 1961."
The Income-tax Act 1961 has been replaced by the Income-tax Act, 2025 (Act 30 of 2025), which came into force on 1 April 2026. The provisions on PAN and TAN are now in the 2025 Act, and this chapter cites that Act. The concordance is at the foot of the chapter, so a student who is asked the question in MU's words can answer it in the words of the Act now in force and show that they know why.
In one line
Permanent Account Number is a ten-character identifier allotted by the Assessing Officer to a person, under which every dealing that person has with the income-tax authorities is recorded.
Section 2(76) of the Income-tax Act 2025 defines it:
"Permanent Account Number (PAN)" means a unique number consisting of ten alphanumeric characters, allotted by the Assessing Officer to a person for the purpose of identification under this Act, and includes a Permanent Account Number allotted under the new series;
Who must apply, and this is the examinable part
Section 262(1) of the Income-tax Act 2025:
Every person who has not been allotted a Permanent Account Number shall, within such time as may be prescribed, apply to the Assessing Officer for its allotment if he fulfils any of the following conditions:-
(a) his total income or the total income of any other person for which he is assessable under this Act during any tax year exceeded the maximum amount not chargeable to income-tax; or
(b) he is carrying on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed Rs. 5,00,000 in any tax year; or
(c) he is required to furnish a return of income under section 263 for any tax year; or
(d) he is a resident, other than an individual, which enters into a financial transaction aggregating to Rs. 2,50,000 or more in a tax year; or
(e) he is the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of the person referred to in clause (d) or any person competent to act on behalf of the person referred to in clause (d); or
(f) he intends to enter into such transaction as may be prescribed by the Board in the interest of revenue.
Six conditions, and any one of them is enough.
Clause (b) is the one that catches a new business, and the figure is low. A business whose sales are likely to exceed Rs. 5,00,000 in a tax year must apply, whether or not it makes a profit and whether or not it has any taxable income at all.
What PAN Is
Clause (d) and clause (e) go together. A resident firm entering into a financial transaction of Rs. 2,50,000 or more must have a PAN, and so must every partner and every person competent to act for it.
Section 262(2): the voluntary application
Any person, not covered under sub-section (1) may apply to the Assessing Officer for the allotment of a Permanent Account Number after which the Assessing Officer shall allot a Permanent Account Number to such person.
Anybody may have a PAN. The section obliges some and permits all.
What the holder must then do
Section 262(3). Quote the PAN in all returns to, and correspondence with, any income-tax authority, and in all challans for the payment of any sum due under the Act.
Section 262(4). Intimate the Assessing Officer of any change in address, or in the name and nature of the business on the basis of which the PAN was allotted. This is forgotten constantly and it is a real obligation.
Section 262(5) and (6). Quote the Aadhaar number in the application form and in the return, and where a PAN was already allotted, intimate the Aadhaar number to the prescribed authority.
Section 262(8). A person who has already been allotted a PAN cannot apply for, obtain or possess another. Holding two is an offence and both are liable to be treated as invalid.
The ten characters
The Act fixes the length and says nothing about the composition, which is the Department's own.
| Position | What it is |
|---|---|
| 1 to 3 | An alphabetic series, running AAA to ZZZ |
| 4 | The status of the holder |
| 5 | The first letter of the surname for an individual, or of the name for any other person |
| 6 to 9 | A number from 0001 to 9999 |
| 10 | A check letter |
The fourth character is the one to read: P individual, F firm including an LLP, C company, H Hindu undivided family, A association of persons, B body of individuals, T trust, L local authority, J artificial juridical person, G government.
So a PAN beginning AAAFS is a firm whose name begins with S, and a candidate asked to identify the status from a PAN reads the fourth character and stops.
Why a business needs it before anything else
PAN is the first registration, and everything else hangs off it.
- GST registration requires a PAN. Section 25(6) of the CGST Act says every person shall have a PAN in order to be eligible for registration.
- Udyam registration links investment and turnover to the PAN, and paragraph 3(3) of the notification treats every GSTIN under one PAN as one enterprise.
- A current account cannot be opened without one.
- TDS is deducted at a higher rate where the deductee has not furnished a valid PAN, under section 397(2).
- Import and export need an Importer Exporter Code, which is now the PAN itself.
What PAN Is
A firm that applies for GST before it has a PAN will be stopped at the first screen. The order of registrations is set by this dependency, and the chapter at the end of Module II sets it out.
The Act MU names, and the Act now in force
| Income-tax Act 1961, which MU's syllabus names | Income-tax Act 2025, in force from 1 April 2026 | |
|---|---|---|
| Status | Replaced. Act 30 of 2025 supplies the whole of the income-tax law from the tax year 2026-27 | The law a candidate is writing under |
| PAN: who must apply, what must be quoted, one PAN only | The 1961 Act's own PAN section | Section 262 |
| TAN: who must apply and what must be quoted | The 1961 Act's own TAN section | Section 397(1) |
| Higher deduction where PAN is not furnished | The 1961 Act's own provision | Section 397(2) |
| Return of income | The 1961 Act's own return section | Section 263 |
Write the section of the 2025 Act. If the question is put in the words of the 1961 Act, say in one line that the 1961 Act has been replaced by the Income-tax Act 2025 with effect from 1 April 2026, and answer under the section of the new Act. That is a complete and correct answer to a question asked in older words.
The rest of the statute book has not caught up either, and it is worth noticing: section 25(6) of the CGST Act 2017 still says a person must have a Permanent Account Number "issued under the Income-tax Act, 1961" in order to be eligible for registration. The requirement is unchanged; only the Act that allots the number has a new name and a new number for the section.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.