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Tax Laws and Practice · Procedural Compliance under Income Tax

Permanent Account Number and TAN under Income-tax Act, 2025

Updated 11 October 2026 · Fact-checked

PAN is a unique identification number allotted under section 262 of the Income-tax Act, 2025. You must apply if you meet a listed condition, such as income above the exemption limit or business turnover above ₹5,00,000. You quote it in returns, correspondence, challans and prescribed transactions. Wrong or missing quoting attracts a ₹10,000 penalty under section 467.

Understand Permanent Account Number and TAN

A Permanent Account Number (PAN) is the number the tax department uses to identify you and track your financial dealings. Once allotted, it stays with you. The law says a person cannot apply for, obtain or possess a second PAN (section 262(8)).

Section 262(1) lists who must apply if they do not already have a PAN. The application goes to the Assessing Officer within the prescribed time. The conditions are:

  • Total income (yours, or of another person you are assessable for) exceeded the maximum amount not chargeable to tax in a tax year.
  • You carry on business or profession and total sales, turnover or gross receipts are, or are likely to be, more than ₹5,00,000 in a tax year.
  • You must file a return of income under section 263.
  • You are a resident, other than an individual, entering into financial transactions of ₹2,50,000 or more in a tax year.
  • You are a managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer, office bearer, or any person competent to act for such a person.
  • You intend to enter into a transaction the Board prescribes in the interest of revenue.

Anyone else may apply voluntarily under section 262(2), and the Assessing Officer then allots a PAN.

Quoting is the second half of the rule. Under section 262(3) you quote PAN in all returns, in correspondence with any income-tax authority, and in all challans for payment of tax. Under section 262(9) a person entering into a prescribed transaction must quote PAN or Aadhaar in the documents and authenticate it. The person receiving such a document must check that it is quoted and authenticated.

Aadhaar is linked to PAN. If you are eligible for Aadhaar, you quote it in the PAN application and in the return of income (section 262(5)). If you already hold a PAN, you must intimate your Aadhaar number; failing that, the PAN is made inoperative (section 262(6)). You may quote Aadhaar in place of PAN in the cases in section 262(7).

TAN (Tax Deduction and Collection Account Number) is a different number. It is for persons who deduct or collect tax at source, and it is quoted in TDS and TCS returns, challans and certificates. The Income-tax Act, 2025 text supplied to you covers PAN in section 262, so treat the detailed TAN provisions as a point to confirm from the ICSI study material. Remember the core difference: PAN identifies a taxpayer, TAN identifies a tax deductor or collector.

Key rules to remember

Who must apply for PAN (income)
Total income > maximum amount not chargeable to tax in a tax year
Section 262(1)(a). Applies to your income or the income of another person you are assessable for.
Who must apply for PAN (business)
Sales, turnover or gross receipts > ₹5,00,000 in a tax year (actual or likely)
Section 262(1)(b). Covers business or profession. The word 'likely' matters.
Resident non-individual
Financial transactions aggregating to ₹2,50,000 or more in a tax year
Section 262(1)(d). Note 'or more', unlike the ₹5,00,000 test which says 'exceed'. Directors, partners, trustees and similar persons of such an entity must also apply (clause (e)).
One person, one PAN
Already allotted PAN → cannot apply for, obtain or possess another
Section 262(8).
Where PAN must be quoted
Returns + correspondence with income-tax authority + challans (section 262(3)); prescribed transactions (section 262(9))
Aadhaar may be quoted in lieu in the cases in section 262(7).
Penalty
₹10,000 under section 467
Default in complying with section 262 (467(1)); false number quoted knowingly (467(2)), failure to quote or authenticate (467(3)), or failure of the receiver to ensure correct quoting (467(4)) are ₹10,000 for each such default.

How to solve Permanent Account Number and TAN questions

Most questions give you a person and some facts, then ask whether PAN is needed, how to apply, or what penalty applies. Use this order.

  1. 1Identify the person: individual, company, firm, trust or other, and whether resident.
  2. 2Check if a PAN is already held. If yes, no second PAN can be taken (section 262(8)).
  3. 3Test each condition in section 262(1): income above exemption limit, turnover above ₹5,00,000, return filing duty, non-individual resident with transactions of ₹2,50,000 or more, office-holder status, or a prescribed transaction.
  4. 4If no condition applies, state that PAN is not mandatory but may be applied for voluntarily under section 262(2).
  5. 5State the application route: to the Assessing Officer, within the prescribed time, with Aadhaar quoted if eligible.
  6. 6Apply the quoting rules: returns, correspondence, challans, and prescribed transactions with authentication.
  7. 7If there is a default, state the penalty under section 467 and who can impose it (the Assessing Officer, with the amount per default).
  8. 8Write a one-line conclusion answering the exact question asked.

Quickest way: Four-question PAN check

When to use it: Use it for short-answer or case questions where you have under five minutes.

  1. Does the person already hold a PAN? If yes, stop: no second PAN.
  2. Is there income above the exemption limit, turnover above ₹5,00,000, a return duty, or a resident non-individual with ₹2,50,000 or more of transactions? If yes, PAN is mandatory.
  3. Is the person an office-bearer of a covered non-individual? If yes, PAN is mandatory for them too.
  4. If a default occurred, apply ₹10,000 per section 467 and name the sub-section.

Common mistakes in Permanent Account Number and TAN

  • Applying the ₹5,00,000 limit to total income instead of turnover.

    Both figures appear in the same section and look similar.

    Fix: Turnover, sales or gross receipts of ₹5,00,000 relate to business or profession. For income, the test is the maximum amount not chargeable to tax.

  • Saying a company needs PAN only if it earns income above the exemption limit.

    The income test is learnt first and is applied to every person.

    Fix: A resident non-individual must also apply if its financial transactions total ₹2,50,000 or more in a tax year, and its directors and office-bearers are covered too.

  • Writing that a person can hold two PANs if each is for a different business.

    Students think one PAN is tied to one activity.

    Fix: Section 262(8) bars a second PAN altogether. One person, one PAN.

  • Treating PAN and TAN as interchangeable.

    Both are ten-character identifiers used in tax compliance.

    Fix: PAN identifies a taxpayer. TAN is for those who deduct or collect tax at source and is quoted in TDS and TCS documents.

  • Stating the penalty as ₹10,000 in total when several defaults occur.

    Section 467(1) has no 'each default' wording.

    Fix: Sub-sections (2), (3) and (4) impose ₹10,000 for each such default. State the sub-section you rely on.

  • Forgetting the duty of the person who receives the document.

    Students focus on the person who quotes.

    Fix: Under section 262(9)(b) and 467(4), the receiver must ensure PAN or Aadhaar is quoted and authenticated, and is penalised if not.

Worked examples

Example 1

Ravi Traders, a proprietary concern of Ravi Menon in Kochi, has expected gross receipts of ₹6,20,000 in the tax year. Ravi has no PAN. Is he required to obtain one? Advise.

Show the solution
  1. Provision: section 262(1)(b) requires a person to apply for PAN if he carries on business or profession whose total sales, turnover or gross receipts are or are likely to exceed ₹5,00,000 in any tax year.
  2. Facts: Ravi carries on business and gross receipts are ₹6,20,000.
  3. Analysis: ₹6,20,000 is more than ₹5,00,000, so the condition is met. He has no PAN, so section 262(8) does not bar him.
  4. Procedure: he must apply to the Assessing Officer within the prescribed time and quote his Aadhaar number in the application if he is eligible to obtain one (section 262(5)).

Answer: Yes. Ravi must apply for a PAN under section 262(1)(b), quoting Aadhaar in the application if eligible.

Example 2

Sunrise Foods Private Limited, a resident company, quoted a wrong PAN knowingly in a document for a prescribed transaction, and the person receiving the document did not check the PAN. State the consequences under the Income-tax Act, 2025.

Show the solution
  1. Provision: under section 262(9)(a), a person entering into a prescribed transaction must quote PAN or Aadhaar in the document and authenticate it. Under section 262(9)(b), the receiver must ensure it is quoted and authenticated.
  2. Company's default: section 467(2) applies where a person provides a number which is false, knowing or believing it to be false. The Assessing Officer may impose a penalty of ₹10,000 for each such default.
  3. Receiver's default: section 467(4) applies where the person responsible for ensuring correct quoting or authentication fails to do so. The Assessing Officer may impose a penalty of ₹10,000 for each such default.
  4. Note the word 'may': the penalty is imposed by the Assessing Officer and is not automatic.

Answer: The company is liable to a penalty of ₹10,000 per default under section 467(2), and the receiver to ₹10,000 per default under section 467(4), each imposed by the Assessing Officer.

Exam tips

  • Learn the six conditions of section 262(1) as a list. Case questions usually test one or two of them.
  • Keep the two thresholds separate: ₹5,00,000 (business turnover, 'exceed') and ₹2,50,000 (resident non-individual transactions, 'or more').
  • In answers, cite the section and sub-section, for example 262(8) or 467(3). It shows precision.
  • If asked for the difference between PAN and TAN, give purpose, who needs it and where it is quoted, in a short two-column style list.
  • Use the Income-tax Act, 2025 section numbers only. Do not quote old section numbers from the 1961 Act.

Practice questions from Procedural Compliance under Income Tax

Permanent Account Number and TAN in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Permanent Account Number and TAN: frequently asked questions

Who must apply for a PAN under the Income-tax Act, 2025?

A person without a PAN must apply if any section 262(1) condition is met. Examples are income above the exemption limit, business turnover above ₹5,00,000, a duty to file a return, or being a resident non-individual with transactions of ₹2,50,000 or more. Directors, partners and similar office-bearers of such an entity are also covered.

Can I hold more than one PAN?

No. Section 262(8) says a person already allotted a PAN cannot apply for, obtain or possess another one. Doing so is a default under section 262, and the Assessing Officer may impose a ₹10,000 penalty under section 467(1).

What is the difference between PAN and TAN?

PAN identifies a taxpayer and is quoted in returns, correspondence and challans. TAN is meant for persons who deduct or collect tax at source and is quoted in TDS and TCS documents. Confirm the detailed TAN rules from your ICSI study material.

What happens if my PAN is not linked to Aadhaar?

If you are eligible for Aadhaar and hold a PAN, you must intimate your Aadhaar number to the prescribed authority. Under section 262(6)(b), if you fail to do so, the PAN is made inoperative in the prescribed manner.

Can I quote Aadhaar instead of PAN?

In some cases, yes. Under section 262(7), a person who has no PAN but has Aadhaar may quote Aadhaar instead, and is then allotted a PAN. A person with a PAN who has intimated Aadhaar may also quote Aadhaar instead.