PAN (Permanent Account Number) is the ten-digit alphanumeric identifier issued by the Income Tax Department that every taxpayer in India needs. Its main use is filing income tax returns, but PAN is now mandatory for banking, investing, buying property or vehicles above set thresholds, applying for credit cards, and registering a business for GST. Without it, banks and sellers cannot process many transactions, and TDS gets deducted at a higher rate.
What Is the Use of PAN Card in India?
PAN links every financial transaction a person or entity makes to a single, traceable record with the Income Tax Department. It works as a universal identifier across tax filing, banking, investing, and high-value purchases, and as accepted photo ID for both government and private institutions. Under Section 262 of the Income-tax Act, 2025 (the equivalent of Section 139A of the old 1961 Act), PAN must be quoted on a specific list of documents and transactions, detailed further below.
Most people first apply for PAN to file an income tax return or open a bank account. From there, the same number stays attached to every major financial move: buying a car, investing in mutual funds, registering a property, or applying for a business PAN to get GST registration.
Income Tax Uses of PAN Card
Filing income tax returns. PAN is compulsory on every ITR form. The Income Tax Department uses it to match income, deductions, and refunds against a single taxpayer record instead of a name and address that can be duplicated.
TDS and TCS matching. Employers, banks, and clients quote the payee’s PAN while deducting TDS. This is how Form 26AS and the Annual Information Statement get populated correctly, and how refunds get credited without manual verification.
Higher TDS/TCS without PAN. Under Section 397(2) of the Income-tax Act, 2025 (which merges the old Sections 206AA and 206CC), a deductor must apply a higher TDS or TCS rate, generally 20% or the specified rate, whichever is higher, if the recipient does not furnish a valid PAN. This applies to salary, rent, professional fees, contractor payments, and interest.
Correspondence with the tax department. Notices, assessments, and refund communications from the Income Tax Department are all indexed against PAN.
Banking and Financial Transactions That Require PAN
This is where “use of PAN card” matters most in daily life. Rule 159 of the Income-tax Rules, 2026 (which replaced Rule 114B of the 1962 Rules from April 2026) sets out the transactions where quoting PAN is compulsory, along with the value thresholds.
| Transaction | PAN required when |
|---|---|
| Opening a bank account | Mandatory, except Basic Savings Bank Deposit Accounts |
| Cash deposits in a financial year | Aggregate exceeds Rs 10 lakh (the earlier Rs 50,000-per-day rule was removed) |
| Cash withdrawals in a financial year | Aggregate exceeds Rs 10 lakh (new requirement under the 2026 Rules) |
| Time deposits (FDs) | Single deposit above Rs 50,000, or aggregate above Rs 5 lakh a year |
| Credit card application | Mandatory (the earlier debit-card requirement was dropped) |
| Demat or depository account | Mandatory to open |
| Insurance | Mandatory for any account-based relationship with an insurer; premium payments above Rs 5 lakh with PAN, or Rs 2.5 lakh without |
| Mutual fund investment | Exceeds Rs 50,000 |
| RBI bonds or debentures | Exceeds Rs 50,000 |
| Unlisted shares | Exceeds Rs 1 lakh |
| Securities other than shares | Exceeds Rs 1 lakh per transaction |
| Motor vehicle (excluding tractors) | Sale or purchase exceeds Rs 5 lakh; now covers two-wheelers as well |
| Immovable property (sale, purchase, gift, JDA) | Stamp duty value exceeds Rs 20 lakh; buyers without PAN must apply for one if the deal exceeds Rs 45 lakh |
| Hotel, restaurant, banquet hall, convention centre, event manager | Cash payment exceeds Rs 1 lakh per transaction |
| Purchase or sale of goods or services | Exceeds Rs 2 lakh per transaction |
Two changes worth flagging for anyone comparing older articles: cash payments for foreign travel, forex purchase, and RBI prepaid instruments are no longer listed as separate categories under Rule 159. They still need PAN if the transaction crosses the general Rs 2 lakh threshold for goods and services.
What Happens If You Don’t Have PAN for These Transactions?
Anyone who is not a company or firm, and doesn’t hold a PAN, can furnish Form No. 97 at the time of the transaction. Form 97 replaced Form 60 under the 2026 Rules and works the same way: it’s a declaration confirming the transaction along with reasons for not having PAN.
The exception is immovable property. If the transaction value crosses Rs 45 lakh, a declaration is no longer enough. The buyer must actually apply for and hold a PAN before completing the deal.
Minors without taxable income can quote a parent’s or guardian’s PAN for these transactions instead of applying for their own.
PAN Card as Identity Proof
A PAN card is widely accepted as photo ID by government and private institutions across India: banks, airlines, hospitals, and state government offices all take it. It is not, on its own, proof of address or proof of Indian citizenship, since PAN is also issued to foreign nationals investing or working in India. For address verification, banks and other institutions still ask for a separate document such as Aadhaar, a utility bill, or a passport.
PAN Card for Business and GST Registration
Every business entity, whether a proprietorship, partnership, LLP, company, trust, or HUF, needs its own PAN before it can register for GST. The GSTIN itself is built around the entity’s PAN: characters 3 to 12 of a 15-digit GSTIN are the PAN of the registered business. This is also why the fourth character of a PAN indicates holder type (P for individual, C for company, H for HUF, F for firm, T for trust, A for AOP, and so on), since GST and income tax systems both rely on that structure to identify the entity type at a glance.
Businesses also need PAN for:
- Opening current accounts and applying for business loans
- Deducting and depositing TDS as an employer (alongside a separate TAN, which serves a different purpose, see our PAN vs TIN comparison)
- Filing GST returns and reconciling input tax credit against income tax records
- Vendor and contractor payments above TDS thresholds
PAN Card for NRIs and Foreign Nationals
NRIs and foreign nationals who invest in Indian securities, buy property in India, or earn income here need PAN just as resident Indians do. It is required to open an NRE/NRO bank account, invest through the RBI or SEBI-regulated route, and file returns on Indian-source income. Our PAN card for NRIs guide covers the application process, required documents, and the passport and residency disclosures now mandatory under the 2026 Rules in more detail.
Applying for or Updating PAN
If a reader doesn’t have PAN yet, or needs to fix an existing one:
- Apply for a new PAN online through Protean eGov or UTIITSL
- Check the PAN card fees before applying (Rs 91 plus GST for an Indian address, Rs 862 plus GST for a foreign address)
- Review the required documents checklist, since Aadhaar alone is no longer accepted as proof of date of birth from April 2026
- Link PAN with Aadhaar if it isn’t already linked, since an unlinked PAN becomes inoperative
- Link PAN to a bank account for tax refunds and interest reporting
- Use instant e-PAN if Aadhaar-based allotment applies, or download an existing e-PAN if the physical card is misplaced
Anyone still holding a PAN application built around Form 49A should note that Form 49A has been replaced by Forms 93 to 96 from April 2026, based on citizenship and entity type.
What Experts Say
Tax practitioners generally describe the shift from Rule 114B to Rule 159 as a trade-off: routine transactions like small cash deposits and debit card applications need less paperwork, while high-value transactions in property, vehicles, and cash withdrawals face tighter tracking through the Statement of Financial Transactions framework. The common advice is to keep transactions in digital form, since UPI, NEFT, and card payments fall outside most of the cash-specific thresholds in Rule 159, and to apply for PAN well before a property or vehicle purchase rather than at the point of sale, since dealers and registrars will not proceed without it once the threshold is crossed.
Frequently Asked Questions
Is PAN card compulsory for opening a savings bank account? Yes, except for a Basic Savings Bank Deposit Account, where PAN is not required. All other savings and current accounts need PAN under Rule 159 of the Income-tax Rules, 2026.
Can I use Aadhaar instead of PAN? For some specified transactions, yes, under Section 139AA read with the applicable provisions of the 2025 Act. But PAN cannot be skipped entirely for tax filing, TDS matching, or the high-value transactions listed under Rule 159.
What is the PAN threshold for buying a car? PAN is required for any motor vehicle purchase or sale exceeding Rs 5 lakh, excluding tractors. This threshold now also applies to two-wheelers, which were treated differently under the older Rule 114B.
Do I need PAN to buy property? Yes, if the stamp duty value of the sale, purchase, gift, or joint development agreement exceeds Rs 20 lakh. If the transaction exceeds Rs 45 lakh and the buyer has no PAN, a declaration is not accepted, and the buyer must apply for PAN before completing the deal.
What happens if I don’t quote PAN for TDS? The deductor must apply a higher rate, generally 20% or the applicable rate, whichever is higher, under Section 397(2) of the Income-tax Act, 2025. The excess can only be recovered by filing a return and claiming a refund.
Is a PAN card valid as proof of address? No. A PAN card is accepted as photo identity proof but not as proof of address, since the card does not carry a current residential address.