Income Tax 2025

Appearance

CHAPTER XV RETURN OF INCOME A.—Allotment of Permanent Account Number

Permanent Account Number. ​

262(1) ​

Every person who has not been allotted a Permanent Account Number shall, within such time as prescribed, apply to the Assessing Officer for its allotment if he fulfils any of the following conditions:—

  • (a) his total income or the total income of any other person for which he is assessable under this Act during any tax year exceeded the maximum amount not chargeable to income-tax;
  • (b) he is carrying on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed five lakh rupees in any tax year;
  • (c) he is required to furnish a return of income under section 263 for any tax year; or
  • (d) he is a resident, other than an individual, which enters into a financial transaction aggregating to two lakh fifty thousand rupees or more in a tax year; or
  • (e) he is the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of the person referred to in clause (d) or any person competent to act on behalf of the person referred to in clause (d).

262(2) ​

Any person, not covered under sub-section (1) may apply to the Assessing Officer for the allotment of a Permanent Account Number after which the Assessing Officer shall allot a Permanent Account Number to such person.

262(3) ​

Every person shall quote Permanent Account Number in all his returns to, or correspondence with, any income-tax authority and in all challans for the payment of any sum due under this Act.

262(4) ​

Every person shall intimate the Assessing Officer of any change in his address or in the name and nature of his business on the basis of which the Permanent Account Number was allotted to him.

262(5) ​

Every person who is eligible to obtain Aadhaar number shall quote such number in the application form for allotment of Permanent Account Number and in the return of income.

262(6) ​

  • (a) Every person who has been allotted Permanent Account Number and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to the prescribed income-tax authority in such form and manner, as prescribed;
  • (b) if a person fails to intimate his Aadhaar number as per clause (a), the Permanent Account Number allotted to that person shall be made inoperative in such manner as prescribed.

262(7) ​

Every person who is required to furnish or intimate or quote his Permanent Account Number under this Act, and who—

  • (a) has not been allotted a Permanent Account Number but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar number in lieu of the Permanent Account Number, and such person shall be allotted a Permanent Account Number in the manner, as prescribed;
  • (b) has been allotted a Permanent Account Number, and who has intimated his Aadhaar number as per sub-section (6) may furnish or intimate or quote his Aadhaar number in lieu of the Permanent Account Number.

262(8) ​

A person who has already been allotted a Permanent Account Number cannot apply, obtain or possess another Permanent Account Number.

262(9) ​

  • (a) Every person entering into such transaction, as prescribed, shall quote his Permanent Account Number or Aadhaar number, in the documents pertaining to such transactions and also authenticate such Permanent Account Number or Aadhaar number, in the manner, as prescribed;
  • (b) every person receiving any document relating to the transactions referred to in clause (a), shall ensure that Permanent Account Number or Aadhaar number, has been duly quoted in such document and that such Permanent Account Number or Aadhaar number is authenticated as prescribed.

262(10) ​

The Board may make rules providing for—

  • (a) the form, manner and time in which an application may be made for the allotment of Permanent Account Number and the particulars which such application shall contain;
  • (b) class or classes of persons who shall be required to apply for allotment of Permanent Account Number;
  • (c) categories of documents pertaining to business or profession in which Permanent Account Number shall be quoted by every person;
  • (d) the form and manner in which the person who has not been allotted a Permanent Account Number shall make his declaration;
  • (e) manner of authentication of Permanent Account Number or Aadhaar number;
  • (f) class or classes of persons to whom the provisions of this section shall not apply having regard to the transactions or the circumstances.

262(11) ​

  • (a) The Central Government may, by notification, specify any class or classes of persons who shall apply to the Assessing Officer for the allotment of Permanent Account Number within such time as mentioned in such notification;
  • (b) the class or classes of persons in clause (a) may include such persons–– (i) by whom tax is payable under this Act; or (ii) by whom any tax or duty is payable under any other law in force; or (iii) being importers and exporters, even when no tax is payable by them.

262(12) ​

The provisions of sub-sections (5) and (6) shall not apply to such person or class or classes of persons or any State or part of any State, as notified by the Central Government.

262(13) ​

In this section,—

  • (a) “Aadhaar number” shall have the same meaning as assigned to it in section 2(a) of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016;
  • (b) “Assessing Officer” includes an income-tax authority who is assigned the duty of allotting permanent account number;
  • (c) “authentication” means the process by which the Permanent Account Number or Aadhaar number along with demographic information or biometric information of an individual is submitted to the income-tax authority or such other authority or agency as prescribed for its verification and such authority or agency verifies the correctness, or the lack thereof, on the basis of information available with it.
Explanation

Section Summary: ​

Section 262 of the Income Tax Act deals with the allotment and use of Permanent Account Numbers (PAN). It mandates who must apply for a PAN, how it should be used in tax-related transactions, and the linkage of PAN with Aadhaar. The section also outlines the consequences of non-compliance, such as making a PAN inoperative if Aadhaar is not linked. It applies to individuals, businesses, and other entities, ensuring proper identification and tracking for tax purposes.

Key Changes: ​

  1. Mandatory PAN for Specific Groups: The section now explicitly requires individuals and entities to apply for a PAN if they meet certain conditions, such as exceeding income thresholds, engaging in high-value transactions, or being involved in specific roles (e.g., directors, partners, trustees).
  2. Aadhaar-PAN Linkage: PAN holders eligible for Aadhaar must link their Aadhaar number to their PAN. Failure to do so will render the PAN inoperative.
  3. Use of Aadhaar as PAN Substitute: In certain cases, Aadhaar can be used in place of PAN for tax-related purposes.
  4. Prohibition on Multiple PANs: Individuals cannot hold more than one PAN.
  5. Authentication of PAN/Aadhaar: Transactions above specified thresholds require quoting and authenticating PAN or Aadhaar.

Practical Implications: ​

  1. For Individuals:
    • If your income exceeds the tax-free limit or you engage in high-value transactions, you must apply for a PAN.
    • You must link your PAN with Aadhaar to keep it active.
    • Aadhaar can be used as a substitute for PAN in certain cases, simplifying compliance.
  2. For Businesses:
    • Businesses with turnover exceeding ₹5 lakh must obtain a PAN.
    • Directors, partners, and other key personnel must ensure their PAN is linked to Aadhaar.
    • PAN must be quoted in all business-related documents and transactions.
  3. For Compliance:
    • Taxpayers must ensure PAN is quoted in all tax returns, correspondence, and payment challans.
    • Changes in address or business details must be updated with the tax authorities.
    • High-value transactions require PAN or Aadhaar authentication.

Critical Concepts: ​

  1. Permanent Account Number (PAN): A unique 10-digit alphanumeric identifier issued by the Income Tax Department.
  2. Aadhaar Number: A 12-digit unique identity number issued by UIDAI, linked to biometric and demographic data.
  3. Authentication: Verification of PAN or Aadhaar using demographic or biometric information to ensure accuracy.
  4. Inoperative PAN: A PAN becomes inoperative if the holder fails to link it with Aadhaar, restricting its use for tax purposes.

Compliance Steps: ​

  1. Apply for PAN:
    • If you meet the conditions under Section 262(1), apply for a PAN within the prescribed time.
    • Use the prescribed form and provide necessary details, including Aadhaar (if eligible).
  2. Link PAN with Aadhaar:
    • If you have both PAN and Aadhaar, intimate your Aadhaar number to the tax authorities.
    • Ensure the linkage is completed to avoid your PAN becoming inoperative.
  3. Quote PAN/Aadhaar in Transactions:
    • Use PAN or Aadhaar in all tax returns, correspondence, and high-value transactions.
    • Ensure the recipient of transaction documents verifies the PAN/Aadhaar.
  4. Update Changes:
    • Notify the tax authorities of any changes in address, name, or business details.
  5. Avoid Multiple PANs:
    • Ensure you do not hold more than one PAN.

Examples: ​

  1. Individual with High Income:
    • Raj earns ₹3.5 lakh annually, which is below the tax-free limit. He is not required to apply for a PAN. However, if his income exceeds ₹2.5 lakh in the next year, he must apply for a PAN.
  2. Business Owner:
    • Priya runs a small business with annual turnover of ₹6 lakh. She must apply for a PAN and quote it in all business transactions and tax filings.
  3. Aadhaar-PAN Linkage:
    • Anil has a PAN but has not linked it with his Aadhaar. His PAN becomes inoperative, and he cannot file his tax return until he completes the linkage.
  4. High-Value Transaction:
    • Meena buys a car worth ₹10 lakh. She must quote her PAN or Aadhaar in the purchase documents, and the dealer must verify it.

This section ensures proper identification and tracking of taxpayers, simplifies compliance through Aadhaar integration, and prevents tax evasion by mandating PAN for high-value transactions.