Permanent Account Number or simply PAN  is a ten-digit alphanumeric number, issued in the form of a printed plastic [earlier days, it was paper printed & laminated] card, by the Income Tax Department [Government of India], to any “Indian-national applicant” who applies for it or in some cases to whom the department allots the number without an application.

An example of how a PAN card looks like.

PAN enables the department to link all transactions of the “person” with the department. These transactions include tax payments, TDS / TCS credits, returns of income / wealth / gift / FBT, specified transactions, correspondence, and so on. PAN, thus, acts as an identifier for the “person” with the tax department.

PAN was introduced to facilitates linking of various documents, including payment of taxes, assessment, tax demand, tax arrears etc. relating to an assessee, to facilitate easy retrieval of information and to facilitate matching of information relating to investment, raising of loans and other business activities of taxpayers collected through various sources, both internal as well as external, for detecting and combating tax evasion and widening of tax base.

A typical PAN, for example looks like this. ABCPE1234Z.

• First three characters i.e. 'ABC' in the above PAN are alphabetic series running from AAA to ZZZ
• Fourth character of PAN i.e. 'P' in the above PAN represents the status of the PAN holder. 'P' stands for Individual, 'F' stands for Firm, 'C' stands for Company, 'H' stands for HUF, 'A' stands for AOP, 'T' stands for TRUST etc. [refer the table below for better understanding]
• Fifth character i.e. 'E' in the above PAN represents first character of the PAN holder’s last name/surname.
• Next four characters i.e. '1234' in the above PAN are sequential number running from 0001 to 9999.
• Last character i.e. 'Z' in the above PAN is an alphabetic check digit.

	Status of Assessee	Fourth Character of PAN
1.	Individual Person	P
2.	Hindu Undivided Family	H
3.	Firm / Limited Liability Partnership	F
4.	Association of Persons [AOP]	A
5.	Body Of Individuals[BOI]	B
6.	Company	C
7.	Trust [AOP]	T
8.	Local Authority	L
9.	Artificial Judicial Person	J
10.	Government	G

To obtain a PAN, one has to submit the filled application form,

Note: Only one PAN should be obtained in any case of the above assessee. Any possession of more than one PAN is an offense, and if already obtained more than one - the additional have to be surrendered back to Income Tax Department.

Income Tax is the levy (tax) imposed by Income Tax Department, Government of India as direct tax on individuals or entities (taxpayers), who earn income in India and the rate of Income Tax varies with the income or profits (taxable income) of the taxpayer.

The Central Government of India has been empowered by Entry 82 of the Union List of Schedule VII of the Constitution of India to levy tax on all income other than agricultural income (subject to Section 10(1)). It is levied as per strength of an act called 'Income Tax Act 1961', according to 'Income Tax Rules 1962', passed by Parliament of India. Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by Supreme Court and High Courts.

In India, Income tax was introduced in 1860, abolished in 1873 and reintroduced in 1886. Income tax levels in India were very high during the period 1950-1980, and in 1970-71 there were 11 tax slabs with highest tax rate being 93.5% including surcharges. It was in 1973-74 where the highest rate was 97.75%. But to reduce tax evasion tax rates were reduced later on, by 1992-93 maximum tax rates were reduced to 40%, which is the present high 2012-13.

The very first step to enroll and pay Income Tax in India, is that every taxpayer is to obtain an unique alpha-numeric number, called 'Permanent Account Number' or simply called 'PAN', issued by the Income Tax Department  in the form of printed plastic card [6cm x 9cm]. The car is allotted to whoever applies for it or in some cases to whom the department allots the number without an application. Know more about PAN, click here.

Once the PAN is obtained, the taxpayer/assessee is supposed to compute his income [from all the various sources] and pay the Income tax amount to the Income Tax Department, GOI. The tax can be paid in any of the recognised banks - which is now almost becoming obsolete, as modernisation and computerisation of the whole process is now online, hence online payment is much sought after nowadays. To learn about computation of Income tax, click here.

Certain books of records has to be maintained, and it may have to be audited to comply with the Income Tax Act. To learn more about books of records & audits, click here.

After the computed Income Tax is derived and paid to the ITD, the assessee has to compulsorily file returns by using the relevant and adequately completed 'Income Tax Return' [ITR] form as necessary. Ever since the whole process of paying and filing returns of Income tax been computerised, normally the ITR's are filled from the start point of the whole process - hence it arrives at an accurate records that would be filed and making the whole process simpler. To know more about ITR-forms, click here.