CMA Intermediate · Direct and Indirect Taxation

PAN: formula sheet

Full chapter guide

Key formulas

PAN format: AAAAA9999A = 5 letters + 4 digits + 1 letter (10 characters); Letters are capital English alphabets. Total length is always 10.
Characters 1 to 3: Three letters; An alphabetic series assigned by the department. Carries no personal meaning.
Character 4 (holder status): P = Individual; C = Company; H = HUF; F = Firm/LLP; A = AOP (non-trust); B = BOI; L = Local authority; J = Artificial juridical person; G = Government; T = Trust; Memorise this list. It is the most tested part of the structure.
Character 5: First letter of surname (individual) or of name (other holders); For P-type PANs it is the surname, not the first name.
Characters 6 to 9: Four digits; A sequential number. Do not read personal meaning into it.
Character 10: One alphabetic check character; Allotted by the department. It helps catch errors in the number.
Income trigger: Total income > maximum amount not chargeable to tax → PAN compulsory; Use the exemption limit that applies to that person. The test is on total income, not gross receipts.
Business or profession trigger: Sales / turnover / gross receipts (actual or likely) > ₹5,00,000 in the year → PAN compulsory; Applies to a person carrying on business or profession. 'Likely' means expected turnover counts. Exactly ₹5,00,000 does not exceed the limit.
Return filing trigger: Person required to furnish a return of income → PAN compulsory; Covers persons who file even when income is exempt, such as specified trusts and institutions.
Voluntary application: Any person not covered above → may apply, not must; A voluntary PAN is valid and works the same way.
Notified classes: Central Government may notify other classes of persons; For example persons in specified financial transactions. Mention it as an extension, do not invent limits.
One person, one PAN: Persons per PAN = 1; PANs per person = 1; Holding more than one PAN is a default. The extra PAN must be surrendered for cancellation.
Form to use for fresh PAN: Indian citizen or entity → prescribed form for Indian applicants; foreign citizen or entity → prescribed form for foreign applicants; The form numbers under the Income-tax Rules, 2026 must be checked in the current rules. In the exam, name the form by its description.
Documents needed: Identity proof + Address proof + Date of birth (individual) / Incorporation or formation proof (entity); Aadhaar can serve the purpose for eligible individuals.
Correction of PAN data: Existing PAN + request for changes or correction + supporting proof; The PAN number stays the same. Only the data and the card change.
Surrender of duplicate PAN: Retain one PAN; surrender the rest to the Assessing Officer; Quote the PAN you retain, and do not use the surrendered one.
General quoting rule: PAN to be quoted in: all returns + all correspondence with income-tax authority + all challans (s.262(3)); Applies to every person holding a PAN.
Transaction quoting rule: Prescribed transaction → quote PAN or Aadhaar in document + authenticate (s.262(9)(a)); The receiver must ensure it is quoted and authenticated (s.262(9)(b)). Transactions are prescribed by rules.
Aadhaar with PAN application and return: Eligible for Aadhaar → quote Aadhaar in PAN application and return of income (s.262(5)); Section 262(6) covers PAN holders who must intimate Aadhaar otherwise.
Non-intimation of Aadhaar: Aadhaar not intimated under s.262(6)(a) → PAN made inoperative (s.262(6)(b)); Inoperative in the manner prescribed. Sub-sections (5) and (6) can be switched off by notification for some persons or areas (s.262(12)).
Aadhaar in lieu of PAN: Aadhaar may be quoted instead of PAN (s.262(7)); Available to a person without PAN who holds Aadhaar, or to a PAN holder who has intimated Aadhaar.
One PAN only: One person = one PAN (s.262(8)); Applying for or holding a second PAN is not permitted.
Penalty: Penalty = ₹10,000 (s.467); General default under s.467(1). Per default for false number, failure to quote or authenticate, and receiver's failure under s.467(2) to (4). The Assessing Officer 'may' impose it.

Quick revision

PAN is a ten-character alphanumeric identifier issued by the Income-tax Department.
One person should hold only one PAN; holding more than one is a default.
The structure has letters and digits in a fixed pattern, and one character shows the type of holder.
Know who must obtain PAN on their own and who must obtain it only on notice.
PAN applications are made in the prescribed form, with identity and address proof.
Quote PAN in the transactions prescribed in the rules, subject to the thresholds in the current official text.
Quote PAN in returns, correspondence and challans as required.
Where a deductee does not give a valid PAN, tax deduction at source happens at a higher rate, as the law provides.
Giving a wrong PAN or not quoting it when required can attract a penalty.
PAN and Aadhaar linking matters; an inoperative PAN has consequences under the rules.
GST registration is linked to PAN, so revise this link when you study indirect tax.
Check every threshold and section number against the Income-tax Act, 2025, not the 1961 Act.

Common mistakes

Saying the first letter of the PAN is the first letter of the holder's name. Fix: The fifth character carries the name initial. The first three are a department series.
Using the first name initial for the fifth character of an individual PAN. Fix: For individuals the fifth character is the first letter of the surname.
Saying turnover of exactly ₹5,00,000 requires PAN. Fix: The test is 'exceeds'. Equal to the limit does not trigger it, unless likely turnover goes above it.
Using income instead of turnover for a trader, or the reverse. Fix: Apply the income test to total income and the business test to sales, turnover or gross receipts. Check both.
Applying for a fresh PAN when only the name or address has changed. Fix: Remember the PAN is permanent. Request correction on the existing PAN.
Treating a lost PAN card as a reason to apply for a new PAN. Fix: Ask for a reprint or download the e-PAN. A second application creates a duplicate PAN.
Writing that the Act lists every transaction that needs PAN. Fix: Say that section 262(9) requires quoting for transactions prescribed by rules, and the Board makes those rules under section 262(10) and section 533(2)(h).
Saying the PAN is cancelled if Aadhaar is not intimated. Fix: The Act says the PAN 'shall be made inoperative' in the prescribed manner. Use the word inoperative.

Exam tips

Memorise the fourth-character list. It is the usual MCQ target.
In MCQs, check the fifth character against the surname for P-type PANs. Options often differ only here.
In written answers, state the format, then the meaning of characters 4 and 5, then the purpose of PAN. This earns step marks.
Use the Income-tax Act, 2025 as the governing law in your answer. Do not cite the 1961 Act.
Do not quote section numbers unless you are sure of them. Describe the rule in words.
In MCQs, check whether the figure equals or exceeds ₹5,00,000. Exactly ₹5,00,000 is the usual trap.
Write the trigger by name in written answers. Examiners give step marks for stating the condition and then the conclusion.
Keep 'compulsory' and 'voluntary' clearly apart in your final line.