Proprietorship firms are the most preferred business entities which are mostly preferred by those who are having small sized businesses within a particular locality. These firms are having very less formalities in comparison to corporate bodies hence they are suitable for the business which are low cost. One formality which is common in sole proprietorship firms and corporate entities is that both need to get their PAN Card. Proprietorship firms need its own PAN for various reasons like for the purpose of taxation. In order to get this, such firms need to follow proper procedure which will be discussed in the current blog in full detail. PAN Card is one of the most important documents for any entity and all proprietorship firms need its own PAN.
What do you Mean by Proprietorship Firm?
Sole proprietorship firms are those that are managed by a single person without any benefits such as perpetual succession, limited liability, or status of a juristic person. The person in charge of these types of businesses is referred to as the proprietor. Only one person may be the member in charge of the business entity and all aspects of the business in a sole proprietorship firm registration. Unlike corporate entities, these firms can be registered without the requirement to fulfill several criteria. They can be identified, for example, by shop and establishment certification, MSME registration, GST registration, but with them proprietorship firms need its own PAN.
Why Proprietorship Firms Need Its Own PAN Card?
The Indian Income Tax Department issues PAN cards, or Permanent Account Number cards, which are essential identity documents. Each PAN cardholder is assigned a unique 10-digit alphanumeric code that helps the government track and control financial transactions while maintaining accountability and transparency in the tax system. These ten PAN Card numbers have a specific meaning.
Sole proprietorships are registered in the owner’s name. He is the only one in charge of the form’s operations. Thus, it can be stated that the lone proprietor of the company will be included on the PAN Card of the sole proprietor. For the sole proprietorship to conduct a variety of financial and tax-related transactions, this PAN card is necessary. As a result, the business owner must promptly obtain it or we can say that because of the above reasons proprietorship firms need its own PAN.
Process of Obtaining PAN Card for Proprietorship Firms
As mentioned above that all proprietorship firms need its own PAN Card now it is evident that it is mandatory for them to get this document. Hence in order to get the same one must follow the steps given below:
- Get the PAN card application form (Form 49A) either online or from local UTIITSL or NSDL offices.
- Provide accurate details of the proprietorship firm, including business name, address, and contact information in the application form.
- Submit necessary supporting documents, such as identity proof, address proof, and proof of the firm’s existence (e.g., registration certificate).
- Pay the applicable processing fee for the PAN card application. This can be done online or through a demand draft.
- Send the completed application to the closest NSDL or UTIITSL office, together with any necessary supporting documentation and the processing fee. As an alternative, mail it.
- After submission, receive an acknowledgment receipt with a unique 15-digit acknowledgment number for tracking the application status.
- Authorities will verify the details provided in the application, and in case of discrepancies, they may seek clarification.
- Once verified, the PAN card will be allotted, and the card will be sent to the registered business address.
- Receive the PAN card at the registered business address, containing details like the business name, proprietor’s name, and PAN number.
- The obtained PAN card can be utilized for various financial and tax-related transactions, including filing income tax returns and other business activities.
Documents Required to Get PAN Card for Proprietorship Firms
proprietorship firms need its own PAN Card for which proper process to get the same is there and in order to complete the same one must have the following documents:
- Copy of any government-issued photo ID such as Aadhar card, Voter ID, Passport, Driving License, or any other valid ID.
- Copy of any government-issued photo ID or utility bills like electricity, water, or gas bill.
- Documents proving the existence of the sole proprietorship firm, including the registration certificate, business license, or official documents issued by a government authority.
- Two recent passport-size photographs of the proprietor.
- One xerox of the PAN card of the proprietor.
- Depending on the jurisdiction and assessing officer’s discretion, additional documents may be requested.
Benefits of Having a PAN Card for Proprietorship Firms
Some of the key benefits due to which sole proprietorship firms need its own PAN Card are mentioned below:
- PAN card serves as a legal identification for the proprietorship firm, establishing its unique identity for various business and financial transactions.
- A PAN card is essential for opening a bank account in the name of the proprietorship, facilitating financial transactions and business operations.
- It is mandatory for high-value financial transactions, and having a PAN card ensures smooth and legal financial dealings for the proprietorship.
- PAN is a prerequisite for Goods and Services Tax (GST) registration, enabling the proprietorship to engage in lawful business activities.
- Banks and financial institutions often require PAN details for loan applications, making it crucial for obtaining business loans or credit facilities.
- PAN facilitates transparent and lawful business transactions, ensuring compliance with tax laws and regulations.
- PAN card aids in legal compliance, allowing the proprietorship firm to adhere to taxation laws and regulations imposed by the government.
- Having a PAN card helps the proprietorship avoid penalties and legal consequences associated with non-compliance in financial and tax matters.
- Possession of a PAN card enhances the credibility of the proprietorship firm, instilling trust among clients, customers, and financial institutions.
- PAN is often required for participating in government tenders and contracts, opening up opportunities for the proprietorship to engage in public sector projects.
- For real estate transactions or property purchases in the name of the proprietorship, a PAN card is necessary.
- PAN facilitates effective financial planning and management for the proprietorship, allowing it to track income, expenses, and taxes.
- PAN enables the proprietor to avail of income tax deductions and benefits applicable to business entities.
- For international business transactions, having a PAN card is crucial for compliance with cross-border financial regulations.
Conclusion
Proprietorship firms need its own PAN Card because of various reasons. Sole proprietorship being straightforward business entities, require their own PAN card, primarily for taxation and financial transactions. The PAN card is crucial for legal identification, opening bank accounts, filing income tax returns, complying with GST regulations, and facilitating transparent and lawful business transactions. Possessing a PAN card enhances the credibility of the proprietorship firm, enabling it to engage in various financial activities, obtain loans, and participate in government tenders. Additionally, the PAN card is essential for real estate transactions and international business dealings, contributing to effective financial planning and management.
