PAN

Permanent Account Number (PAN) is the 10-character alphanumeric identifier issued by the Income Tax Department under Section 139A of the Income Tax Act 1961. The most ubiquitous Indian financial identifier.

Structure decoded — using `ABCDE1234F` as an example:

• Positions 1–3 — Alphabetic series: random letters (e.g., `ABC`).
• Position 4 — Entity type:
• - `P` = Individual (Person)
• - `C` = Company
• - `H` = HUF
• - `F` = Firm / LLP
• - `A` = Association of Persons (AOP)
• - `T` = Trust
• - `B` = Body of Individuals
• - `L` = Local Authority
• - `J` = Artificial Juridical Person
• - `G` = Government
• Position 5 — Surname/entity-name initial: first character of the surname of an individual, or of the entity name.
• Positions 6–9 — Sequential number: 4 random digits.
• Position 10 — Check alphabet: derived via a checksum algorithm.

Who needs PAN:

• Every person whose total income exceeds the basic exemption limit (currently ₹2.5 lakh under the old regime).
• Every entity carrying on any business or profession with sales / turnover / gross receipts exceeding ₹5 lakh in a FY.
• Every company / LLP / partnership / trust on incorporation.
• Every person entering specified high-value transactions (Rule 114B): bank account opening (other than basic), property purchase ≥ ₹10 lakh, vehicle purchase, fixed deposits ≥ ₹50,000, etc.
• Non-residents transacting in India — including foreign shareholders, FPIs, AIF non-resident LPs.

PAN-Aadhaar linking (Section 139AA):

Mandatory for resident individuals — unlinked PANs are 'inoperative' (since July 2023), meaning higher TDS rates, inability to file ITR, refunds withheld, and KYC issues.

For startups and cap tables:

• Every shareholder, director, KMP must have a PAN.
• PAN is captured in PAS-3 (allotment), MGT-7 (annual return), DIR-12 (director appointment), and the Register of Members (MGT-1).
• TDS / TCS filings reference PAN — non-PAN or invalid PAN attracts higher TDS rates under Section 206AA (20% or applicable rate, whichever higher).
• For non-resident investors, the PAN is the primary tax identifier; absent PAN, the lower-of-treaty-or-domestic-rate withholding under Section 206AA does not apply.

Pitfall: Capturing PAN incorrectly in MGT-1 / PAS-3 is a top-3 due-diligence finding. Always validate against the Income Tax PAN verification API.