Emilie Meyer
In India, the PAN (Permanent Account Number) is a 10-digit alphanumeric identifier issued by the Income Tax Department. It is primarily used for tax-related purposes, such as tax-deducted at the source (TDS), and is mandatory for employees to submit to their HR or accounts department. While an employer can view an employee's PAN details, it is not a common method for employment verification. However, it is important to note that providing dishonest information about one's employment history can have serious consequences, and it is generally recommended to be upfront about past work experiences.
| Characteristics | Values |
|---|---|
| Data Accessibility | Data from any government ID number is only accessible to the government. |
| Data Usage | The Income Tax Department can look up financial behaviour through a PAN number. |
| Background Checks | Background checks may include employment history verification, but PAN is more commonly associated with tax and financial purposes. |
| Mandatory Submission | Employees must submit their PAN to their HR or accounts department for tax purposes. |
| TDS and PAN | If TDS is deducted, credit is available to the taxpayer if PAN details are provided. |
| Non-Submission Consequences | Failure to provide PAN details may result in a higher tax deduction rate of 20% or more. |
| PAN and Aadhaar Interchangeability | PAN and Aadhaar are interchangeable, but ensure they are interlinked. Providing an incorrect Aadhaar number can result in a fine. |
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What You'll Learn
PAN cards are mandatory for tax purposes
In India, a Permanent Account Number (PAN) card is a crucial form of identification for tax purposes. It is a unique identification number that enables tax-paying entities to comply with various tax regulations and avoid penalties. PAN cards are mandatory for all persons who pay taxes in India and are involved in financial transactions.
PAN cards are required for several identity and financial purposes. For example, it is necessary for opening a bank account, applying for credit or debit cards, and for transactions above a certain limit. The specific limit for transactions requiring a PAN card is Rs. 10,000, and for bank deposits, the limit is Rs. 50,000 in a day. PAN cards are also essential for purchasing property and vehicles, with the exception of two-wheelers.
When it comes to loans and credit, financial institutions require a PAN card for personal, home, or vehicle loans. Additionally, for investments, a PAN card is mandatory for transactions in securities, mutual funds, and fixed deposits exceeding Rs. 50,000. It is also required for purchasing gold worth over Rs. 2 lakh, helping to prevent tax evasion and ensuring transparency in high-value transactions.
Furthermore, a PAN card is crucial for businesses, serving as proof of identity and aiding in various verifications and legal formalities. It is a prerequisite for GST registration, which is mandatory for businesses exceeding a certain turnover threshold.
It is worth noting that having more than one PAN card is a punishable offence in India, and individuals are allotted only one PAN. This PAN number allows the Income Tax Department to look up an individual's financial behaviour.
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Employers require PAN cards to make tax deductions
In India, a PAN card is mandatory for all persons who pay taxes and conduct financial transactions. The PAN card serves as proof of the individual's signature for financial transactions and as photo identification. It is a 10-digit alphanumeric number, with each character representing distinct information about the cardholder.
Under the Income Tax Act, it is obligatory for employees to submit their PAN to their employer's HR or accounts department. This is so that the employer can make tax deductions at source if the income is above the taxable limit. The employer must quote the employee's PAN or Aadhaar number when deducting tax. The rate of tax deduction is higher if an employee fails to provide their PAN, but they can claim a refund after filing their income tax returns.
The Income Tax Department can access an individual's financial behaviour through their PAN number. However, according to one source, it may also be possible for others to access financial information with just the PAN number and basic personal details.
All Indian citizens and Non-Resident Indians (NRIs) are eligible to apply for a PAN card, as well as artificial entities such as companies, firms, associations, and Hindu undivided families.
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PAN details are not commonly used for employment verification
In India, the Permanent Account Number (PAN) is a unique, 10-digit alphanumeric identifier issued by the Income Tax Department. While PAN details are mandatory for tax-related transactions and documentation, they are not commonly used for employment verification.
PAN details are primarily used for tax purposes. Under the Income Tax Act, all employees must submit their PAN to their HR or accounts department if their income is above the taxable limit. This is to facilitate tax deduction at source (TDS). When TDS is deducted, the credit is available to the taxpayer if PAN details are provided and submitted in TDS returns. In cases where employees do not provide their PAN details, employers are obligated to deduct TDS at a higher rate, and employees can claim a tax refund after filing their income tax returns.
Although PAN details are not typically used for employment verification, there may be instances where an employer or HR department uses them to check an individual's financial behaviour or credit report. However, it is important to note that data from government ID numbers, including PAN, is officially only accessible to the government and the Income Tax Department.
It is worth mentioning that, in recent years, PAN and Aadhaar have become interchangeable. Individuals can now quote their 12-digit Aadhaar number in lieu of their PAN, provided that the two identity documents are interlinked. This offers an alternative method for employers to verify employee details, particularly for tax-related purposes.
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Employees must submit PAN details to HR or accounts
In India, under the Income Tax Act, employees are mandated to submit their PAN (Permanent Account Number) details to their office's HR or accounts department. This is because the office is responsible for making TDS (tax deduction at source) if the income exceeds the taxable limit. During tax deduction, the employer must quote the employee's PAN or Aadhaar number. It is important to note that if an employee's income is below the taxable threshold, they are not required to submit their PAN or Aadhaar card, as no TDS should be deducted by the employer per Section 206AA of the Income Tax Act. For instance, in the financial year 2019-2020, income up to ₹2.5 lakh was tax-exempt.
However, if an employee fails to furnish their PAN card details, their employer will deduct TDS at a higher rate of 20% or more. Nevertheless, if the employee's income computed for TDS under Section 192 falls below the taxable limit, no tax will be deducted.
While it is generally understood that only the Income Tax Department can access financial information through a PAN number, there are reports suggesting that an individual's full credit report can be accessed with their PAN number and basic personal details, such as their date of birth. This raises concerns about the ease of accessing financial information without proper authorization.
Additionally, in certain cases, an employee's UAN (Universal Account Number) can be used to verify their employment history. This is often utilized for background verification (BGV) in some companies. However, if an employee is a trainee, on a stipend, or on a contract without a PF account, their UAN will not reflect this specific employment experience.
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Employees can quote Aadhaar in place of PAN
In India, employees can quote their Aadhaar number in place of a PAN card number for cash transactions of more than Rs. 50,000. This was implemented by FM Nirmala Sitharaman in her first budget of Modi 2.0 to allow for the ease of compliance of taxpayers. Aadhaar is India's national biometric ID number, and as it is backed by the biometric data of citizens, it is considered completely safe.
Previously, any person who wanted to make a cash deposit or withdrawal of more than Rs. 50,000 in banks was required to specify their PAN card number. Additionally, PAN was mandatory for the purchase of immovable property above Rs. 10 lakh. However, there were instances of people quoting the wrong PAN number or obtaining a PAN card fraudulently. Now, with Aadhaar, people are not required to generate a PAN, which is more convenient for some.
It is important to note that PAN will not be phased out and will continue to coexist with Aadhaar. Some people still prefer to use PAN, and for every PAN, there will be an Aadhaar. For new applicants of the PAN card, the Aadhaar PAN linking is done automatically during the application stage. For existing PAN holders who were allotted PAN on or before July 1, 2017, it is mandatory to link PAN with Aadhaar. This can be done on the e-Filing Portal by entering the required details and validating the two numbers.
While the data from any government ID number is officially only accessible to the government, there are reports of people being able to access others' financial information through their PAN number and basic details. Therefore, it is important to be cautious when providing sensitive information and to keep personal information secure.
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Frequently asked questions
No, PAN is typically used for tax-related transactions and documentation. However, it is mandatory for employees to submit their PAN to their employer, and it is obligatory for the employer to quote the PAN when deducting tax at source.
If you don't submit your PAN, your employer will deduct TDS at a higher rate of 20% or more. However, if your income is below the taxable limit, you are not required to submit your PAN, and no TDS will be deducted.
Yes, PAN and Aadhaar are interchangeable. However, ensure that the two documents are interlinked, and be careful as providing an incorrect Aadhaar number can result in a fine.
Only the Income Tax Department can look up your financial behaviour through your PAN. However, there are reports of individuals accessing others' full credit reports with just their PAN and basic personal details.
PAN stands for Permanent Account Number. It is a unique, 10-digit alphanumeric identifier issued by the Income Tax Department in India.
