PAN (Permanent Account Number)

What is PAN (Permanent Account Number)?

PAN follows a fixed format: five letters, four digits, one letter. The fourth letter encodes entity type (P for individuals, F for firms, C for companies, H for HUF, T for trusts). Once issued, PAN is permanent and never changes even if you move cities, change jobs, or update your name. For salaried employees, PAN is the link between payroll, the employer's TDS filings (Form 24Q), and the income tax department's records (Form 26AS, AIS). If the employee doesn't share PAN, the employer must deduct TDS at the higher of the applicable rate or 20% under Section 206AA. From 1 July 2017, PAN must be linked with Aadhaar. An unlinked PAN became inoperative from 1 July 2023. Inoperative PAN means TDS is deducted at higher rate, refunds are blocked, and the deductee credit may not show in 26AS.

Example

Suman joins a new company. Her PAN is ABCPS1234F. She shares it with HR on day one. Her TDS for the year is correctly mapped to her in 26AS, and she gets her Form 16 with PAN matching. Her colleague Rahul forgot to link his PAN to Aadhaar, so the employer is forced to deduct TDS at 20%.

How PAN (Permanent Account Number) is used

Payroll software validates PAN format and (via NSDL or third-party APIs) PAN-Aadhaar link status during onboarding. Invalid or inoperative PAN triggers a higher TDS flag automatically.

PAN (Permanent Account Number) FAQs

What if my PAN is not linked with Aadhaar?

Your PAN becomes inoperative. TDS is deducted at higher rate, refunds get blocked, and 26AS credit may not flow. You can re-activate by linking and paying a late fee.

Can two people have the same PAN?

No. PAN is unique per person. Holding more than one PAN attracts a ₹10,000 penalty under Section 272B.

Is PAN mandatory for getting salary?

Yes for any salary that exceeds the basic exemption limit. Without PAN, the employer must deduct TDS at 20% or the applicable rate, whichever is higher.