Table of Contents
- Introduction
- What is PAN Card and Why Banks Need It
- PAN Requirement in Banking as per Income Tax Rules
- PAN Card Rules for Deposits & Withdrawals
- PAN Requirement for Fixed Deposits, Savings & Current Accounts
- PAN for ATM Transactions and UPI Limits
- PAN Requirement for High-Value Cash Transactions
- PAN for Interest Income & TDS Deduction
- PAN Requirement for NRO / NRE Accounts
- PAN Requirement in Digital Banking & Fintech
- Penalties and Consequences of Not Providing PAN
- Who Must Provide PAN in Banking
- Documents Required with PAN Verification
- Common Mistakes Users Make
- FAQs
- Final Conclusion
Introduction
In India, banking transactions are closely monitored by the Income Tax Department, especially when it involves large cash deposits, withdrawals, investments, or high-value financial activities. To ensure transparency, identity verification, and tax compliance, the Permanent Account Number (PAN) plays a crucial role. Whether you are opening a bank account, making large deposits, investing in fixed deposits, or dealing with high-value financial transactions, PAN Card is mandatory in several cases as per Rule 114B of the Income Tax Rules.
This article explains in detail when PAN Card is required in banks, transaction limits, penalties, and the latest guidelines applicable in India.
What is PAN Card and Why Banks Need It?
A PAN Card is a unique 10-character alphanumeric identification issued by the Income Tax Department of India. It helps track financial activities, income sources, and prevent tax evasion.
Banks need PAN to:
- Verify financial identity
- Monitor high-value transactions
- Track deposits and withdrawals
- Prevent money laundering
- Comply with RBI and Income Tax rules
Without PAN, many banking services cannot be availed.
PAN Requirement in Banking as per Income Tax Rules
The Government of India has made PAN mandatory for several financial activities to maintain transparency. As per Rule 114B, PAN is required whenever a person conducts specified financial transactions in a bank or financial institution.
PAN Requirement for Deposits & Withdrawals (Cash)
Below is the latest guideline for cash deposits and withdrawals in India:
| Transaction Type | PAN Requirement |
|---|---|
| Cash Deposit above ₹50,000 in a single transaction | Mandatory |
| Cash Deposit exceeding ₹2.5 lakh during a financial year | Mandatory (especially during tax scrutiny) |
| Cash Withdrawal above ₹50,000 in a single transaction | Mandatory in many banks |
| Deposits in Post Office Savings Accounts above limits | PAN Required |
Providing PAN ensures the transaction remains legally compliant and helps avoid future complications.
PAN Requirement for Savings & Current Accounts
Banks cannot open certain accounts without PAN or Form 60.
| Account Type | PAN Requirement |
|---|---|
| Savings Bank Account | PAN Required / Form 60 Alternative |
| Current Account | Strictly Mandatory |
| Joint Accounts | PAN of primary holder mandatory |
| Minor Accounts | PAN of Guardian Required |
PAN Requirement for Fixed Deposits & Recurring Deposits
If you are planning to invest in Fixed Deposits (FD) or Recurring Deposits (RD) above a certain threshold, PAN is compulsory.
| Deposit Type | PAN Requirement |
|---|---|
| FD Above ₹50,000 in a single transaction | Required |
| Total FD investment above ₹5 Lakh | Required |
| Interest earnings subject to TDS | PAN Required |
Without PAN, banks deduct higher TDS (Tax Deducted at Source) on interest income.
PAN Requirement for ATM & UPI Transactions
Currently:
- Normal ATM withdrawals do not require PAN
- UPI payments do not require PAN
However, for high-value linked transactions, PAN verification becomes necessary to comply with banking KYC norms.
PAN Requirement for High-Value Cash Transactions
Banks must report transactions exceeding limits to the Income Tax Department.
Reportable transactions include:
- Deposits above ₹10 lakh in a financial year
- Large Fixed Deposit investments
- High-value withdrawals
- Suspicious transactions
Hence, PAN ensures transparent tracking.
PAN for Interest Income & TDS
When interest income crosses the exemption limit:
- PAN is required to apply correct TDS rate
- Without PAN, 20% TDS may be deducted instead of lower applicable rates
This makes PAN extremely important for deposit holders.
PAN Requirement for NRO / NRE Banking
For NRIs:
- Opening NRO Account: PAN Required
- Opening NRE Account: PAN Recommended
- Interest filing & remittance compliance: PAN Necessary
NRIs dealing with investments or property in India must maintain PAN for smooth financial processing.
PAN Requirement in Digital Banking & Fintech
Leading payment platforms and banks require PAN for:
- Wallet KYC upgrades
- High-value wallet limits
- Digital loan applications
- Online FD investments
This ensures compliance with Indian financial regulations.
Penalties and Consequences of Not Providing PAN
If you fail to provide PAN when required:
- Transaction may be denied
- Higher TDS deduction
- Banking account restrictions
- Possible IT scrutiny
- Difficulty in future financial activities
Thus, keeping PAN updated with banks is essential.
Who Must Provide PAN?
You must provide PAN if you:
- Deposit large sums
- Open a bank or current account
- Apply for loans or credit
- Invest in deposits
- Conduct high-value transactions
Documents Required with PAN Verification
Banks may also request:
- Aadhaar Card
- Address Proof
- Photograph
- Mobile verification
- KYC documents
Common Mistakes Users Make
- Using inactive PAN
- Not linking PAN with Aadhaar
- Providing incorrect PAN
- Ignoring compliance rules
These mistakes may cause banking delays.
FAQs
Is PAN mandatory for normal bank account?
Yes, PAN or Form 60 is mandatory.
Do I need PAN for ATM withdrawal?
No, normal ATM withdrawals do not need PAN, but high-value compliance may require verification.
What happens if I deposit more than ₹50,000 cash?
You must provide PAN, otherwise the bank may block the transaction.
Is PAN required for UPI transactions?
Regular UPI does not require PAN, but high-value linked banking validations need PAN KYC.
Final Conclusion
The PAN Card is an essential financial document for anyone using banking services in India. From opening accounts to handling high-value deposits, withdrawals, and investments, PAN ensures compliance, transparency, and smooth financial operations. To avoid penalties, higher TDS, or banking restrictions, always provide your PAN Card whenever required and ensure it is updated with your bank.