For any financial transactions above Rs. 50,000 PAN (Permanent Account Number) is mandatory to quote. Fixed deposit is not an exception in this rule. Many investors hesitate to give their PAN, fearing theft of identity or excessive taxation. However, it is the myth. In reality, quoting PAN makes you a compliant citizen and secures your investment. You can always save tax if the income is within your taxable limits. Read on below paragraphs to know the importance of PAN card when you open FD with any bank or financial institute.
Security of Investment
Every citizen of India has a unique PAN card. It is quite possible to have a common name and surname of the individuals. However, they cannot have the same PAN card. Hence, in case your FD is misplaced by you, you can safely and rightfully claim your money by presenting your PAN card if you have quoted it while opening the FD. On the other hand, chances of fraud and miss-representation increases when no PAN is attached with your fixed deposit.
The rate of TDS (Tax Deduction at Source)
Every financial institution is mandated to deduct the income tax at source for interest income, popularly known as TDS. If your FD has PAN information, mandated TDS rate is 10% of interest income. In the absence of PAN, TDS shall be deducted at 20% rate. Hence, you are liable to pay double income tax when you do not quote the PAN.
TDS cannot be claimed back while you file your income tax return. On the other hand, FD with PAN is eligible for tax credit. You can also claim the refund of the tax deducted if your gross income is within the taxable limit.
If no PAN is quoted, no TDS certificate is issued. Hence, even if your tax is deducted, you cannot claim a tax deduction in any of your income tax return. It is similar to the situation when you have made payment,but you cannot avail the receipt of the same. Consider applying PAN if you do not have the same.
If your gross income is below taxable limit, you can claim exemption from TDS. However, such exemption is not valid if your deposit does not bear PAN. This rule is also applicable for Form 15 G or 15 H that are widely used to prevent TDS from the fixed deposit. Hence, even if you are not liable to pay income tax because of your lower income, you have to pay heavy tax at the rate of 20%, only because of the absence of PAN.
Limit on FD Amount
Without PAN, you can open a fixed deposit from Bajaj Finance with a very limited amount of Rs. 50000 or less. No financial institution is allowed to open FD beyond this limit without furnishing PAN from the depositor.
Benefits of Furnishing PAN in your Fixed Deposit
There are dead-ended implications of not furnishing PAN in your fixed deposit. On the other hand, furnishing PAN card gives you several benefits. First and foremost, there is no limit on the investment amount. You can invest the amount of your choice without any limitation, to make your fixed deposit. If your gross income is below taxable limit, you can submit form 15 G or 15 H to prevent TDS from your interest income. In the case of taxable income, TDS will be deducted at the rate of 10% only. You shall be issued TDS certificate,and the tax credit will also be reflected in your form 26AS.
Moreover, by any chance, if you miss your fixed deposit receipt, you can request for duplicate receipt from the bank or NBFC by presenting your original PAN card. The bank will retrieve the details from the system based on your PAN card and issue duplicate receipt. Hence, your money is safe when you use your PAN card while making a fixed deposit.
Applying PAN is Easy
Nowadays applying PAN is easy and online. You have to furnish basic details about your identity, residential address,and date of birth. Consider applying for the same if you do not have it, and enjoy legitimate tax saving on your hard earned money.