Business entities like Partnership Firm, Private Limited Company, Limited Liability Partnership, One Person Company Needs PAN Account number for starting up business in India. Having a PAN is beneficial for the company in a number of ways
- PAN is basically your company’s tax identity.
- PAN will help a company in filing Income Tax Returns
- PAN will help in getting different types of invoices and remittances.
What is PAN (Permanent Account Number)
Permanent Account Number (PAN) is an important document for all taxpayers. Companies, whether incorporated in India or abroad, need PAN if they are doing business in India. At the same time, companies that have Indian origin but are generating income outside the country also need to quote PAN for several purposes in the country. The process to apply for a PAN Card for Company is simple and can be done online. Companies incorporated in India have to fill Form 49A in order to apply for a fresh PAN.
Any individual or entity doing business with an Indian firm or generating money out of India (either through invoices) are required to have a PAN number from now on – even if they don’t have any permanent establishment, registration or office presence in India. These could be: companies, firms, LLC, LLP, partnerships, sole proprietorship, trusts, incorporations, limited companies, private firms, associations, foreign institutional investors, hedge funds, etc.
Few Important Reasons to Apply
It may act as an important legal document for individuals, but do companies need to get them too? In order to answer this question, consider the following:
- Was created as a reference number. So, the Income Tax department can track all your financial transactions using this code. That is why it is mandatory to quote it on your income tax document and your transactions. This again, is also the reason why a PAN card for a company is required even if you are not eligible for paying taxes.
- All companies, be they registered in India or abroad need to pay tax just like an individual. So, in order to get their invoices paid, remittances, file their income tax returns and other needs, they need a PAN number which needs to be quoted on each and every transaction.
- Companies just like individuals have to supply their Tax Registration Number (TRN) to the people who are paying them. A firm can obtain a TRN only when it has its own PAN.
- Since the government of India uses this tool to calculate the total amount of tax income which is being generated in the country, if your organization is not registered in India, even then it should get one.
- The simplest yet most powerful reason why a company, either domestic or foreign, needs to have its own PAN number is that, without it the government of India will deduct tax at the highest possible rate. So, you may be losing out on some viable tax saving opportunities and this may turn out to be quite an expensive affair.
The Income Tax Act of 1961 was amended and Section 206AA was inserted in 2009 by the Finance Act. According to this, all foreign parties which generate or provide payment to Indian counterpart have to provide their PAN number. This includes not only individuals but also companies, incorporations, limited companies or any other form of entities. This rule came into effect in April 2010.
Why does your company need a PAN card?
Some of the reasons why getting a PAN Card is important are listed below.
- It was made mandatory by the Government of India under the Income Tax Act, 1961 in recent years and came into effect in April 2010. The Act was amended and Section 206AA was inserted in 2009 by the Finance Act. Under this amendment, all foreign parties that provide or generate payment to a counterpart in India will have to provide their PAN. This includes not only individuals but also incorporations, companies, limited companies or any other form of entities.
- In the absence of the PAN, the government will charge withholding tax which can be at the rate of more than 30% of the total invoiced payment.
- It serves as a reference number for the Income Tax Department to track your financial transactions. You will be required to quote your PAN on your transactions and your income tax document.
- Even if you are not eligible to pay taxes, it is mandatory to have one if you are earning money.
- Companies, regardless of whether they are registered abroad or in India, are required to pay tax for businesses carried out in the country. Without the PAN, the government will deduct tax at the highest possible rate.
- Your PAN will help you get invoices paid, remittances, and during income tax returns.
- Just like individuals, companies are required to provide their Tax Registration Number (TRN) to whomever is paying them. A TRN can be obtained only when the company has a PAN.
Documents Required for PAN Card for Company
For PAN application, companies have to submit some documents as proof of identity and address. The registration certificate issued by the Registrar of Companies can serve the purpose of both identity proof and address proof for the companies. Depending on the type of entity, the following documents can be accepted as proof of identity and address
Procedure to get a PAN number, using our services
The PAN card is a laminated photo identity card which is issued to individuals and companies by the Income Tax department of the Government of India. It includes a number of vital information like name, address, date of birth and, most importantly, your PAN number. This is the permanent account number which is unique to every PAN card holder. It is a ten digit alphanumeric code which is issued by the income tax department. If your name or address changes, you can apply to the IT department to make the relevant changes, but the PAN number remains valid for life
The PAN helps the IT department link all transactions with a person. The PAN serves as a mechanism to document all transactions of a person. The IT department ensures through the PAN that everyone is paying their taxes
Unfortunately there are not many benefits of having a PAN number. Rather it is compulsory these days to have one if you wish to invest or do financial transaction here in India.
While PAN numbers are used for tax filing, the PAN card is not. The PAN card is just a physical representation of the PAN. You can provide photocopies of the PAN for various purposes rather than give the original.
As it is an alphanumeric combination that identifies you as a tax paying citizen of the country, the main purpose is to identify you under the Income Tax Act 1961. The Central Board of Direct Taxes (CBDT) supervises the distribution of PANs through the Indian Income Tax Department.
If you don’t have the PAN, you may not conduct many financial transactions. However for some transactions, you can use Form 60 and Form 61 as an alternative.
The process for application for PAN has been streamlined in India. If you are an NRI, and you want to apply for a PAN, you could do it yourself, or with a small fee get it done through our Kou-Chan Services.
Applying for a lost PAN card is difficult but definitely not tough. You need to provide a copy of your PAN proof, and this can be your return copy or a photocopy of your lost one. There are times when the department can accept an FIR from the police as well to print you a new hardcopy. You just need to fill a PAN lost/correction form for the same.
If you want corrections or changes to be done, then you can get this done by filling up a correction/change form. Example: If you wish to get your father name, date of birth or address then this can be done. One can also get changes made to their card like deleting or adding back your maiden name, etc.
Many people think that the PAN card is used for tax purposes only. This is a myth doing the rounds. This myth has deterred people from taking the PAN
Once a PAN is issued it cannot be canceled. Basically a PAN is issued for life and you can only cancel it if you were allotted another PAN number by mistake. You can cancel the PAN that you do not wish to keep out of the two, by logging into the Income Tax website