Section 262 of the Income-tax Act, 2025 — Permanent Account Number (PAN): Who Must Apply, Aadhaar Linking & Quoting Rules

In plain language

What Section 262 is about

Section 262 of the Income-tax Act, 2025 is the single, consolidated law on the Permanent Account Number (PAN). It replaces and re-codifies Section 139A of the old Income-tax Act, 1961, pulling together — in one place — the rules on who must obtain a PAN, how PAN is linked to Aadhaar, when PAN must be quoted, and the bar on holding more than one PAN. These provisions take effect from 1 April 2026 (tax year 2026-27 onwards).

A PAN is a unique 10-character alphanumeric number (like ABCDE1234F) issued by the Income-tax Department. It is the backbone of the tax system — it links your returns, TDS, high-value transactions and refunds to one identity.

Who MUST apply for a PAN

Under Section 262, every person who has not been allotted a PAN must apply for one within the prescribed time if any of the following apply:

• Income above the exemption limit: Your total income (or income of another person for whom you are assessable, e.g. as guardian) during the tax year exceeds the maximum amount not chargeable to tax (the basic exemption limit).
• Business or profession: You carry on a business or profession whose total sales, turnover or gross receipts exceed ₹5,00,000 in any tax year, or are likely to.
• Required to file a return: You are required to furnish a return of income under Section 263 (the return-filing provision of the 2025 Act).
• Resident non-individuals: A resident that is not an individual (company, firm, LLP, trust, AOP, etc.) which enters into one or more financial transactions aggregating to ₹2,50,000 or more in a tax year.
• Key persons of such entities: The directors, partners, trustees, founders, karta, CEO or office-bearers (and persons competent to act on behalf) of the above entities must also obtain PAN.
• Board-notified persons/transactions: Any class of persons the Board specifies by notification.

Anyone else may still apply voluntarily — PAN is useful for opening bank accounts, investing, and avoiding higher TDS.

PAN and Aadhaar — the linking rule

Section 262 hard-wires the PAN-Aadhaar link:

• Every person eligible to obtain Aadhaar must quote the Aadhaar number in the PAN application and in the income-tax return.
• Existing PAN holders must intimate their Aadhaar to the prescribed authority in the prescribed form and manner.
• Failure to intimate Aadhaar makes the PAN inoperative. An inoperative PAN cannot be used effectively — refunds can be withheld and TDS/TCS is deducted at higher rates.
• Where allowed, Aadhaar can be quoted in place of PAN for notified transactions, and the two are treated as interchangeable in those cases.

Quoting PAN — where it is mandatory

Section 262 requires you to quote your PAN in:

• All returns and correspondence with any income-tax authority;
• All challans for payment of any amount due under the Act;
• Prescribed high-value and specified transactions (buying/selling property, motor vehicles, large cash deposits, opening bank/demat accounts, big investments, hotel/foreign-travel bills above notified limits, etc.). In such cases PAN or Aadhaar must also be authenticated where prescribed.

The person receiving the document (bank, registrar, etc.) must ensure the PAN is duly quoted and authenticated.

One person, one PAN

A person who has already been allotted a PAN cannot apply for, obtain or hold a second PAN. Holding more than one PAN is an offence and attracts penalty. If you accidentally hold two PANs, you must surrender the duplicate to the department.

How it interacts with other sections

• Section 263 (filing returns) triggers a PAN requirement and PAN must be quoted on the return.
• PAN/Aadhaar quoting drives the TDS/TCS machinery — no valid PAN means TDS at the higher rate under the deduction provisions.
• The penalty provisions of the 2025 Act (in the penalties chapter, broadly the successors to old Section 272B) impose a penalty (commonly ₹10,000 per default) for failing to comply, or for quoting a false PAN/Aadhaar.

Practical implications

For an ordinary salaried taxpayer, PAN is unavoidable — you need it to file, claim refunds and avoid excess TDS. For businesses, crossing the ₹5 lakh turnover mark makes PAN compulsory. For companies and firms, even a ₹2.5 lakh transaction triggers PAN, and their key managerial persons must be covered too. Most importantly, keep your PAN linked to Aadhaar — an inoperative PAN can freeze refunds and raise your TDS.