Introduction
It has become mandatory for both income earning and non-income earning individuals to possess a valid PAN card. The PAN card is used by income tax authorities to link a unique identity to every individual who has a source of income and falls under taxable brackets. In this blog post, we will discuss the importance and benefits of the link between PAN card and income tax.
PAN Cards for Individuals
Income earning individuals in the country have their earnings categorized based on the source of income. This helps income tax authorities determine the appropriate taxation slab the individual must be taxed and the applicable tax rate. There are two types of income for individuals: earned income and unearned income. Earned income refers to income generated from salary received from a profession or employer, while unearned income includes pension schemes, retirement benefits, royalties, compensation, child support, and more.
Why is PAN Card Important for Individuals?
Having a valid PAN card allows individuals to take advantage of various tax exemptions and deductions dictated by the Income Tax Act. In addition to these benefits, PAN cards are important for individuals in the following ways:
- For the sale and purchase of fixed properties within India.
- For purchasing automobiles.
- To draft a banker’s draft, pay orders, and cheques.
- To buy debentures or equity shares exceeding Rs. 1 lakh in value.
- To make deposits in the bank exceeding Rs. 50,000.
- To open a DEMAT account, bank account, or apply for a credit card.
- As an official photo ID proof.
- To carry out several financial transactions in the country.
- To apply for a landline or mobile connection.
- For NRIs to carry out transactions in different countries.
- To open bank accounts for minors.
Importance of PAN Cards for Income Tax Authorities
PAN cards are used by income tax authorities to calculate the overall tax generated by citizens and determine the tax rate applicable to different income classes. The link between PAN card and income tax is important for the following reasons:
- The Government of India considers PAN cards as valid ID proof with the holder’s name, address, and photograph.
- It aids income tax authorities in determining the applicable tax slab for each individual. Individuals without a PAN card will be taxed at a rate of 20% regardless of their income bracket.
- It makes it easier for the Income Tax Department to track all the income earned by individuals and apply the effective tax rate.
- PAN cards are unique to each cardholder, reducing the risk of misuse even if the card is lost.
Latest PAN Rules 2022
Under the new tax regime, the Indian Government has made amendments to the PAN rules. Here are some of the new PAN rules:
- A PAN card should be furnished for transactions like foreign travel or hotel expenses exceeding Rs. 50,000.
- PAN details are required to purchase jewelry worth more than Rs. 2 lakhs, even if paid in cash.
- PAN cards are mandatory to purchase immovable property worth more than Rs. 10 lakhs.
- PAN should be quoted if an individual makes a term deposit of more than Rs. 50,000 or if the total deposit in a year is more than Rs. 5 lakhs.
- PAN is now compulsory for prepaid instrument transactions worth more than Rs. 50,000.
- PAN cards are mandatory for opening bank accounts, making cash deposits exceeding Rs. 50,000, and other financial transactions.
Individuals who do not have a PAN card but want to carry out transactions that require one will be required to submit Form 60, providing necessary details such as name, date of birth, address, mobile number, and payment information.
FAQs
1. How does a PAN card help income tax authorities?
PAN cards help income tax authorities calculate tax and determine tax rates for individuals based on their income brackets.
2. What are the benefits of having a PAN card for individuals?
Benefits of having a PAN card for individuals include tax exemptions, easier financial transactions, and official photo ID proof.
3. How are PAN cards important for income tax authorities?
PAN cards are important for income tax authorities as they help track income earned by individuals and apply the appropriate tax rate.
4. What are the new PAN rules?
New PAN rules include the requirement of PAN for certain transactions like foreign travel, hotel expenses, jewelry purchase, property purchase, and more.
5. Is it necessary to have a PAN card for opening a bank account?
Yes, PAN cards are mandatory for opening bank accounts.
6. Can individuals without a PAN card be taxed?
Individuals without a PAN card will be taxed at a rate of 20%, regardless of their income bracket.
7. How do individuals without a PAN card carry out transactions that require one?
Individuals without a PAN card can submit Form 60, providing necessary details, to carry out transactions that require a PAN card.
Conclusion
PAN cards are essential for individuals as they provide various benefits, including tax exemptions and easier financial transactions. For income tax authorities, PAN cards help track income and apply the appropriate tax rate. It is important for individuals to comply with the latest PAN rules. Make sure to possess a PAN card to take advantage of its benefits and fulfill necessary requirements. Get your PAN card today and stay on the right track with your income taxes.
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