A Permanent Account Number (PAN) is a unique ten-character code issued to taxpayers and entities. It is quoted on income-tax returns and high-value transactions, and it forms the core of a business’s GSTIN.
PAN links a taxpayer’s financial activity across taxes, which is why it appears in both income-tax and GST contexts.
The ten characters are not random. The first five are letters, the next four digits, and the last a letter serving as a check character; within the letters, the fourth character encodes the holder's type — P for an individual, C for a company, F for a firm, among others — and the fifth is drawn from the holder's name. The same PAN sits embedded as characters three to twelve of every GSTIN the entity holds.
PAN identifies a taxpayer; it should not be confused with TAN, the separate number required by anyone who deducts or collects tax at source. PAN must be quoted on returns and on notified high-value transactions — property purchases, vehicle purchases, large deposits and investments — as prescribed. Where a payee cannot furnish a PAN, payments liable to TDS attract deduction at a higher mandated rate, and the credit becomes difficult to trace to its owner.
For individuals, PAN must be linked with Aadhaar; an unlinked PAN can be made inoperative, which blocks refunds and triggers higher deduction rates until it is restored. Because one entity holds one PAN across all its GST registrations, the department can aggregate a business's turnover nationwide and compare it with the income declared — a linkage that quietly underpins much of India's tax data-matching.