Understanding Your PAN

Permanent Account Number (PAN) is a unique 10 character code issued by the Income Tax Department to identify tax payers or assesses in India. It is Alpha-numeric. PAN is mandatory for all assesses who file returns and for financial transactions where it is necessary to quote the same.

PAN enables the IT Dept. to link transactions like tax payments, TDS/TCS credits, returns of income/wealth/gift/FBT, specified transactions, correspondence, and so on to the person who has been allotted the same. In short it is an identifier for the Tax Dept. and it helps detect any tax evasion by the assesse.

A typical PAN card has the name of the person or establishment and date of birth or incorporation in case of a company. In case of individuals it also has the Father’s name. The PAN in the sample is AAPFA3421J.

  1. The first three letters AAP is the alphabetical series from AAA to ZZZ.

  2. The fourth character denotes the status of the PAN holder. In this case it is ‘F’ which stands for firm.

           Notations are as follows

  • P – Individual

  • F – Firm

  • C – Company

  • H- HUF

  • A – Association of Persons (AOP)

  • T- Trust

  1. The fifth character is the first letter of the PAN holder’s last name or surname in case of individuals and the first letter of the name in case of Non-Individuals.

  2. The next four characters are sequential numbers from 0001 to 9999.

  3. The last letter is an alphabetic check digit.

When is PAN necessary?

It is compulsory for the following transactions

  • Sale or purchase of any immovable property valued at five lakh rupees or more.

  • Sale or purchase of a motor vehicle or vehicle, [the sale or purchase of a motor vehicle or vehicle does not include two wheeled vehicles, inclusive of any detachable side-car having an extra wheel, attached to the motor vehicle]

  • Any fixed deposit more than Rs50, 000 with a banking company

  • Any deposit more than Rs50, 000 with Post Office Savings Bank.

  • Sale or purchase of securities of contract value exceeding Rs1Lakh.

  • Opening a bank account.

  • Making an application for installation of a telephone connection (including a cellular telephone connection).

  • Payment to hotels and restaurants against their bills amounts greater than Rs.25, 000 at one time.

  • Payment for purchase of bank drafts or pay orders or banker’s cheques exceeding Rs50, 000 on a single day.

  • Cash deposits in a bank more than Rs50, 000 during any one day.

  • Payments exceeding Rs 25,000 for foreign travel at any one time.

  • Making an application for credit card or debit card.

  • Mutual Fund investments of Rs50, 000 or more in a single purchase.

  • Amounts exceeding Rs50, 000 to a company for acquiring its shares.

  • Payment of Rs50, 000 to a company or an institution for acquiring debentures or bonds issued by it.

  • Any payment of Rs50, 000 or more to the Reserve Bank of India.

  • Insurance premiums exceeding Rs50, 000 for a year

How to get the PAN Card?

Pan card can be easily obtained through submission of Prescribed application to authorized agency or through online in NSDL website. The documents required are 2 recent passport size photos, proof of ID – Date of birth and address and the prescribed fee. The PAN card will be received in 10-15 days through registered post.

There are lot of fake PAN cards in circulation which is a major cause of concern. Obtaining multiple PAN cards is a malpractice and a fine of Rs 10,000 is laid on illegal PAN card holders. So, while applying for PAN card, one should be careful not to trust fraud agents who claim to provide PAN card directly in hand. Also only two authorized online websites are available for PAN card issue – NSDL and UTI. Hence refrain from resorting to duplicate websites that promise to issue PAN cards.

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What are the different types of ITR forms ?

Tax payers in India are required to declare to the Income Tax Department of Govt of India a summary of income and tax paid during the year (April to March of next year). There are several ITR forms such as ITR-1 (Sahaj) ,ITR-2 ,ITR 2A, ITR-3, ITR-4 and ITR-4S( Sugam), ITR-5 and ITR-6. These forms are released every year by Income Tax Department.  To file Income tax returns one needs to fill the appropriate Income Tax return form.

The Finance Ministry recently announced new ITR2 varieties dropping the controversial obligatory disclosure of overseas journeys and dormant financial accounts. The new types of ITR forms – ITR 2 and ITR 2A have three pages and different particulars in schedules. ITR2A has been introduced by the ministry and filled by a person or HUF who doesn’t have capital goods, revenue from enterprise/ career or overseas revenue / asset. At current people/HUFs having revenue from multiple home property and capital positive aspects are required to file Form ITR-2. The final date of submitting returns has now been extended to August 31.

The form to fill income tax returns is based on the types of income earned. Income Tax Department classifies income into different types as given below:

  • Income from Salary: Income is charged under this if there is or was an employer-employee relationship between the payer and payee. Pensions also are included under this head.
  • Income from Profits and Gains of Business or Profession: Income earned through business or profession (ex-professional working as freelancer) is charged under this category. This is taxed taking into account deductions such as depreciation of assets, rent, expenses and travelling.
  • Income from House Property: Any residential or commercial property that you own will be taxed. Rental income is taxed subject to some exemptions for example on Home Loan.
  • Income from Capital Gains: Any profit or gain arising from transfer of capital asset – it could be property or gold, held as investments are chargeable to tax under the head capital gains.
  • Income from other Sources:  Any income that does not fall under any of the four heads of income above is taxed under the head income from other sources. This includes income from fixed deposits, winning a game show etc.

A tabulated representation on what form can one use for ITR filing based on your income sources:

Form

Category

Details

ITR-1 SAHAJ

Individual

1. Income from salary/pension: or
2. Income from one house property
3. Income from other sources( excluding winnings from lottery and income from races horses)

ITR-2

Individual/HUF

1. Income from salary/pension
2. Income from house property
3. Income from other sources (excluding winnings from lottery and income from races horses)
4.Income from Capital Gains.
5. Income from foreign assets.

They should not have Income from Business or Profession.

ITR-3

Individual/HUF

Being partners in firms and not carrying out business or profession under any proprietorship.

ITR-4S SUGAM

Individual/HUF

It is applicable for small businessmen and professionals from business or profession and gross receipts upto Rs. 60 lacs a year

ITR-4

Individual/HUF

Having income from business or profession (such as insurance agent, doctor, CA, lawyer etc.) with gross receipts of more than RS. 60 lacs a year

ITR-Forms                                          Source file  : http://www.bemoneyaware.com/blog/which-itr-form-to-fill/

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Aadhar card holders now exempt from posting ITR-V

netneutrality

New tax forms released have exempted taxpayers with Aadhaar cards from submitting their ITR-V by post after filing their returns online. The entire procedure of filing returns is now truly paperless for those who don’t have digital signatures as well! This comes as good news to taxpayers who e-file their taxes. Assesses filing I-T returns online will no longer have to send the paper acknowledgement by post. The new Aadhaar-based electronic verification code has been launched by the IT department to authenticate this document.

This move comes after the IT department has linked the electronic verification system endorsed Aadhar card to the ITR form, submitted by a tax payer. The Central Board of Direct Taxes (CBDT) has introduced a new column in the ITRs for 2015-16 where the e-filer can provide his Aadhaar number. The Aadhar number will have to be authenticated on the official website of the department using an OTP (One Time Password).

The process will need the e-filer to register his Aadhar number in the ITR after which the UIDAI database will send an OTP to the registered mobile umber of the taxpayer. The mobile number will have to be authenticated on the e-filing website. The authentication of the filed return thus takes place electronically.

So far online filing was paperless only if the person had a digital signature. Taxpayers without a digital signature had to mandatorily post a physical copy of the ITR-V to the CPC (Central Processing Centre) in Bengaluru within 120 days of filing tax returns online. The physical submission of the ITR-V acknowledgement slip did not allow the e-filing from becoming a completely online process. The new forms which incorporates details of Aadhar card makes e-filing easier. The new procedure will also ease the process of quick generation of refunds of taxpayers.

Several e-filers skip sending their ITR-V forms to CPC assuming the job was done once their return was e-filed. The IT department doesn’t consider a tax return as filed unless the ITR-V reaches them within 120 days of filing the return. The ITR-V needs to be signed and printed properly with the bar code clearly visible. ITR-Vs that did not have these details would get rejected. Complaints of postal delays and losses in transit also were the bane of the procedure. Seamless online filing will rid the system of these hiccups and made many more investors e-file their taxes with ease.

The new forms need a detailed declaration of bank accounts held at the time during the year in ITR-1 including those that have been closed during the payer. ITR-2 seeks particulars of foreign bank accounts and assets held, details of overseas travel and expenses on the trip.

For those who don’t have an Aadhar card yet, they can continue sending the physical documents to CPC as before. You can do that even if you have an Aadhar Card. This new system of verification is a method to ease the process for those who have an Aadhar card – an alternative way to e-file taxes.

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