A Permanent Account Number (PAN) is a crucial document for an Indian business or person, issued by the Income Tax Department. It is a unique ten-character alphanumeric code used for tax-related work. For proprietorship businesses, getting a PAN card is not just a legal need but also a critical step in establishing their identity in tax and finance. The necessity of a PAN card depends on the nature of transactions and the business concern. This blog will provide the details for applying for a PAN card for a proprietorship firm.
Understanding PAN for a Proprietorship Firm
A proprietorship is the most common type of business in India, owned and managed by a single person. They share the same financial and tax identity. While a personal PAN can be used for transactions, tax filings, and compliance, a separate PAN is necessary for practical scenarios like opening a current account, dealing with vendors, or filing GST returns. A proprietorship firm does not need a separate legal PAN number, but a valid PAN card is a must, and all business that is conducted using the PAN number.
Importance of PAN Card for Proprietorship Firms
- Identification & Tax Compliance: PAN card is a universal identification number used for recording and reporting income tax filings and TDS. Without it, a person cannot legally file returns or meet tax liabilities.
- Business Bank Accounts: A PAN card is a must for most banks in India to open current bank accounts in the name of a proprietorship firm. It helps verify the legitimacy of a person and track high-value transactions.
- GST Registration & Licenses: PAN is a must for GST registration, state and central licenses, trade licenses, and Udyam registration for MSMEs.
- Business Credibility and Transparency: PAN enhances business credibility, especially when dealing with corporate clients, suppliers, or government agencies.
- Avoiding Tax Deductions at Higher Rates: PANs are crucial to avoid higher TDS rates, ensuring smooth transactions and proper tax deductions.
Who Needs to Apply for a PAN Number?
Every person or business that is engaged in a taxable financial transaction is required to have a PAN Number or Card. For a proprietorship:
- The person should apply for and use their own PAN for the proprietorship.
- If the person uses a business name that is different from their name, they can still use the same PAN, and only supporting documentation can have the name of the business.
Documents Needed to Obtain a PAN Card for a Proprietorship
If you want to get a PAN card, you will need to submit documents establishing identity and address proofs of the person, along with proofs of business existence. You should have one of each of the following types of documents prepared:
(1) Proof of Identity. (Any one of these):
- Aadhaar Card.
- Voter ID.
- Passport.
- Driving License.
- Any government-issued photo ID card.
(2) Proof of Address. (Any one of these):
- Aadhaar Card.
- Passport.
- Utility bill (electricity or telephone, or water bill – no older than 3 months).
- Bank statement showing current address.
(3) Proof of Business Name/Existence.
- Certificate of Registration under the Shops and Establishments Act.
- Firm’s GST Registration Certificate (if applicable).
- Udyam Registration certificate (for MSMEs).
- Bank account statements in the name of the firm.
- Letterhead or invoice from the business showing the firm name and address.
Steps Guide for Applying for a PAN Card for Proprietorship Firms
PAN Card applications are now easier and safer thanks to digital access provided by government-authorised portals. You can file your application online or offline in accordance with the following steps-
Step 1. Visit the Official PAN Application Portal
You can apply for a PAN card from the following websites:
- NSDL e-Gov, i.e now Protean eGov Technologies- https://www.protean-tinpan.com
- UTIITSL – UTI Infrastructure Technology and Services Ltd. https://www.pan.utiitsl.com
Step 2. Select the Right Application Form
- Form 49A – For Indian citizens (includes proprietorship firms)
- Form 49AA – For foreign citizens
Since proprietorship firms have Indian residents as their owners, we should use Form 49A in this process.
Step 3. Complete the Necessary Details
Fill in the following details accurately –
- Full name of the proprietor
- Name of the firm
- Proprietor’s date of birth
- Address of the business
- Contact details and email ID
Step 4. Upload Your Documents and Signature
You have to upload the scanned copies of all necessary documents in addition to your passport sized photo and digital signature.
Step 5. Payment of Application Fee
The PAN card fee is around Rs 93 (exclusive of GST) if your communication address is in India. Payment can be made online.
Step 6. Application Verification and Acknowledgement
Once the form is submitted, you will receive an acknowledgement number to track your application’s verification. You may need to send the signed acknowledgement printout and passport-sized photo to the processing centre, which will depend on whether you are using e-KYC verification.
Step 7: Issuance of PAN
After your application has been successfully verified, the PAN will be issued to you in 10-15 working days. The applicant receives a digital version of the e-PAN via email. The physical PAN is sent to you by post.
Benefits of Having a PAN Card for Proprietorship Firms
- Tracks Your Taxes and Filing Obligations: It allows you to manage all income, expenses and taxes in a proper and clear manner.
- Facilitates Financial Transactions: If you would like to open a current account, get loans or register under GST and MSME schemes, the PAN card is a critical document needed.
- Establishes Credibility: The PAN card builds trust in clients, vendors and the bank, and provides a clear signal that your business is established on a legal and tax-paying basis.
- Required for High Value Transactions: High-value financial transactions, such as buying land or sending money abroad, all require you to have a PAN card, as does any investment exceeding ₹50,000.
Conclusion
Acquiring a PAN card for a sole proprietorship firm is an important step in constructing a legitimate identity for the business in India. While the owner’s PAN would usually be sufficient, having a PAN card in the name of the business by its trade name will help improve professionalism, ease banking and tax issues, and aid in compliance with legal regulations.
As the economy gets increasingly digital and regulatory, businesses should remain transparent and accountable. The application for a PAN card is very simple and inexpensive. It’s a small step that provides ongoing benefits through accountability and financial growth. Whether starting a business or ensuring compliance with a current business, PAN will assist with the responsible management of one’s business.
