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When PAN Is Mandatory in Transactions in India – Simple Guide for Beginners

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When you start dealing with money in real life, the Income Tax Department often asks for one important detail—your PAN number.

Many beginners wonder: In which money transactions is quoting PAN compulsory? And another common question is: What happens if I don’t have a PAN but still need to do those transactions?

Understanding this is important because PAN helps the government track large financial activities and prevents misuse of cash.

In this guide, I will explain these rules.

Key Takeaways

  • PAN is your financial identity and is required for many high-value transactions in India.
  • Cash payments above ₹50,000 in specific cases usually need PAN quoting.
  • Property deals above ₹10 lakh cannot be done without PAN.
  • If you don’t have PAN, Form 60 can be used as a temporary option.
  • The rules mainly target large cash dealings, not normal digital spending.

What does “quoting PAN” actually mean?

Quoting PAN simply means writing your PAN number while doing certain financial transactions.

Think of PAN as your financial identity card. Whenever you do a big money transaction, the system wants to know who is doing it. That is why PAN is asked.

Why is PAN made compulsory in some transactions?

In practice, large cash or property deals can be misused for hiding income.

So the rule is simple:

  • For small everyday payments, PAN is not required.
  • For big or important financial dealings, PAN must be given

This helps in keeping money matters clean and transparent.

Transactions where PAN is compulsory

Let me explain these one by one.

1. Buying or selling a vehicle

If you purchase or sell any motor vehicle other than a two-wheeler, PAN must be given.

So a car, jeep, truck, tractor – PAN is required.

For scooter or bike – PAN is not compulsory.

2. Opening a bank account

When you open a normal bank account in:

  • a bank, or
  • a cooperative bank,

PAN must be quoted.

But there are two exceptions:

  • Basic Savings Bank Deposit Account
  • Certain time deposits (I will explain later)

3. Credit card or debit card

While applying for a credit card or debit card, PAN is compulsory. Banks need it to check your financial background.

4. Opening a demat account

If you want to invest in shares and open a demat account with:

  • depository
  • broker
  • any SEBI-related institution

PAN is mandatory.

5. Big hotel or restaurant bill in cash

If you pay more than ₹50,000 in cash at one time in a hotel or restaurant, PAN must be given.

This is a common doubt in India—UPI or card payment has no issue, but cash above ₹50,000 needs PAN.

6. Foreign travel or foreign currency

If you pay more than ₹50,000 at one time for:

  • foreign travel, or
  • buying foreign currency in cash,

PAN is compulsory.

7. Time deposits (FDs)

PAN is needed when:

  • Single FD is more than ₹50,000, or
  • Total FDs in a year cross ₹5 lakh

This applies to:

  • banks
  • post office
  • NBFCs
  • Nidhi companies

8. Property transactions

For buying or selling property:

  • value above ₹10 lakh, or
  • stamp duty value above ₹10 lakh,

PAN is mandatory.

This is very important because property deals are closely watched by the department.

Other financial transactions where PAN is a must

  1. Mutual fund investment: When you invest more than ₹50,000 in mutual funds, PAN has to be quoted.
  2. Buying debentures or bonds of a company: Payment above ₹50,000 for purchasing company bonds or debentures requires PAN.
  3. RBI bonds: If you invest more than ₹50,000 in bonds issued by RBI, PAN is needed.
  4. Cash deposit in bank: If you deposit more than ₹50,000 cash in one day in a bank or cooperative bank, PAN is compulsory.
  5. Buying bank drafts / pay orders / banker’s cheques: Cash payment above ₹50,000 in one day for these instruments requires PAN.
  6. Prepaid instruments: If you load more than ₹50,000 in a year in prepaid wallets or similar instruments, PAN is required.
  7. Life insurance premium: If total premium paid in a year is above ₹50,000, PAN must be given.
  8. Purchase of securities (other than shares): If transaction value is above ₹1 lakh per deal, PAN is compulsory.
  9. Purchase of unlisted shares: Buying or selling shares of a private company above ₹1 lakh per transaction needs PAN.
  10. Any other goods or services: If you purchase any goods or services and payment is above ₹2 lakh per transaction, PAN must be given. For example: buying jewellery, costly electronics in cash and any big-ticket purchase

What if you don’t have a PAN?

Many beginners get confused here. The law gives simple solutions.

Option 1 – Use Form 60

If a person does not have PAN, he can give a declaration in Form 60 and still do the transaction.

Option 2 – For minors

A minor child can quote:

  • father’s PAN, or
  • mother’s PAN, or
  • guardian’s PAN

provided the minor has no taxable income.

Option 3 – Special relief for Non-Residents

Non-residents do not need to quote PAN for some transactions like:

  • credit/debit card
  • hotel bills
  • foreign travel
  • RBI bonds
  • banker’s cheque
  • prepaid instruments
  • purchase above ₹2 lakh

One important rule for old bank accounts

If someone opened a bank account earlier without PAN or Form 60, they were required to submit it later. So banks may still ask for PAN to update records.

Conclusion

So remember the simple logic:

  • Small regular payments → no PAN
  • Big financial activities → PAN is compulsory

PAN is not just a number. It is your financial identity and helps keep your money life smooth.

Next learning steps

After this, you can learn:

  • What is Form 60 and how to fill it
  • Difference between PAN and Aadhaar
  • How PAN is used in ITR filing

If you want, you can also check our articles on “Understanding Form 16” and “Basics of TDS for salaried people.”