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Section 262 Income Tax Act 2025: Who Must Obtain a Permanent Account Number (PAN)?

Section 262 of the Income-tax Act, 2025 governs allotment, quoting and authentication of the Permanent Account Number (PAN), Aadhaar-related obligations, and circumstances in which a person must apply for PAN.

Current legal position: Section 262 is in Chapter XV, Return of Income, and has effect from 1 April 2026. It broadly replaces the PAN and Aadhaar provisions in sections 139A and 139AA of the Income-tax Act, 1961. Read the statutory provision with the applicable Income-tax Rules, 2026 and notifications.

Who is required to apply for PAN under Section 262(1)?

A person not already allotted a PAN must apply within the prescribed time if any of the following statutory conditions applies:

  • Income: Total income (including income of another person for which the applicant is assessable) exceeds the maximum amount not chargeable to tax in any tax year.
  • Business or profession: Total sales, turnover or gross receipts exceed, or are likely to exceed, Rs. 5,00,000 in any tax year.
  • Return filing: The person is required to furnish a return under Section 263.
  • Resident non-individual: A resident person other than an individual enters into financial transactions aggregating Rs. 2,50,000 or more in a tax year.
  • Responsible office holders: A managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer, office bearer or other competent representative of the person in the preceding category.
  • Prescribed transactions: A person intending to enter into a transaction prescribed by the Board in the interest of revenue.
Important: The Rs. 5 lakh business threshold and Rs. 2.5 lakh financial-transaction threshold relate to different categories. Neither amount is a general exemption from PAN requirements.

Section 262 explained: Subsections (1) to (13)

Section 262(1): Mandatory application

Specifies the income, turnover, return-filing, entity-transaction, office-holder and prescribed-transaction conditions requiring an application for PAN.

Section 262(2): Voluntary PAN

A person outside the mandatory categories may still apply for PAN; the Assessing Officer is required to allot PAN on such application in accordance with the law.

Section 262(3): PAN in returns, correspondence and challans

Every person must quote PAN in returns and correspondence with income-tax authorities and in challans for payment of sums due under the Act.

Section 262(4): Reporting changes

Changes in address or in the name and nature of the business on which PAN was allotted must be intimated to the Assessing Officer.

Section 262(5): Aadhaar in PAN applications and returns

A person eligible to obtain Aadhaar must quote Aadhaar in the PAN application and return of income, subject to notified exceptions.

Section 262(6): Aadhaar intimation and inoperative PAN

In cases other than subsection (5), a PAN holder eligible for Aadhaar must intimate the Aadhaar number to the prescribed authority in the prescribed manner. Failure can cause PAN to become inoperative as prescribed.

Section 262(7): Use of Aadhaar instead of PAN

Where permitted, a person without PAN who possesses Aadhaar may quote Aadhaar in place of PAN and be allotted PAN in the prescribed manner. An existing PAN holder who has intimated Aadhaar as required may also use Aadhaar in lieu of PAN.

Section 262(8): Only one PAN

A person already allotted PAN cannot apply for, obtain or possess another PAN. A duplicate PAN should be resolved through the prescribed correction or surrender process, not used as a second tax identity.

Section 262(9): PAN or Aadhaar for prescribed transactions

Persons entering into prescribed transactions must quote and authenticate PAN or Aadhaar in relevant documents. Recipients of those documents must ensure that the number is quoted and authenticated in the prescribed manner.

Section 262(10): Rule-making power

The Board may prescribe application forms, manner and deadlines, classes of applicants, documents and transactions requiring PAN, declarations where PAN is absent, authentication processes and exemptions.

Section 262(11): Government notifications

The Central Government may notify additional classes of persons required to apply for PAN, including persons liable for tax or duty under other laws and importers or exporters even where no tax is payable.

Section 262(12): Notified Aadhaar exceptions

The Central Government may notify persons, classes of persons, States or parts of States to whom subsections (5) and (6) do not apply.

Section 262(13): Interpretative definitions

Defines Aadhaar number by reference to the Aadhaar Act, expands Assessing Officer to include an income-tax authority assigned PAN allotment duties, and defines authentication by verification of PAN or Aadhaar and relevant demographic or biometric information.

Relevant statutory definitions

Permanent Account Number (PAN): A unique tax identification number allotted under the statutory PAN framework for identification in tax administration and prescribed transactions.
Aadhaar number: Has the meaning assigned in Section 2(a) of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, as expressly referenced in Section 262(13)(a).
Assessing Officer: For this section, includes an income-tax authority assigned the duty of allotting PAN, under Section 262(13)(b).
Authentication: Verification of PAN or Aadhaar, together with relevant demographic or biometric information, by the prescribed authority or agency against information available to it, under Section 262(13)(c).
Tax year: The statutory period used to determine income and transaction thresholds under the Income-tax Act, 2025; see the definitions in Section 2.

Practical illustrations

Example 1: A sole proprietor expects gross receipts of Rs. 6 lakh in a tax year. Section 262(1)(b) requires a PAN application even if taxable profits are comparatively small.

Example 2: A resident partnership firm enters into financial transactions totalling Rs. 3 lakh during a tax year. Section 262(1)(d) may require PAN for the firm, and clause (e) may separately cover its partners.

Example 3: A person already has PAN but changes the business name. Section 262(4) requires intimation of the relevant change; obtaining a second PAN is prohibited by subsection (8).

What happens if PAN requirements are ignored?

Section 467 of the Income-tax Act, 2025 provides for a penalty of Rs. 10,000 for failure to comply with Section 262. It also provides penalties for specified false PAN or Aadhaar particulars and failures to quote or authenticate the number in prescribed transactions; some defaults attract Rs. 10,000 for each default. Whether a penalty is imposable depends on the particular statutory condition and facts.

For PAN applications, updates and linking, use the official Income Tax e-Filing Portal. Verify current procedural requirements, prescribed transactions and exemptions under the Income-tax Rules, 2026 before acting.

Frequently asked questions

Is PAN compulsory if income is below the taxable limit?

It can be. Turnover, mandatory return filing, specified transactions, entity status or notified requirements may independently trigger Section 262.

What turnover requires PAN for a business?

Section 262(1)(b) uses a threshold of more than Rs. 5,00,000 in total sales, turnover or gross receipts, including amounts likely to exceed that threshold in a tax year.

Can Aadhaar replace PAN?

Section 262(7) permits Aadhaar in lieu of PAN in specified circumstances, subject to the relevant Aadhaar intimation and prescribed procedures. It is not an unconditional replacement for PAN in every situation.

Can one person hold two PANs?

No. Section 262(8) prohibits a person already allotted PAN from applying for, obtaining or possessing another PAN.

What is the penalty for not complying with Section 262?

Section 467 provides a Rs. 10,000 penalty for failure to comply, and separate penalties for certain specified transaction-document defaults.

Official law and further reading

Official Income-tax Act 2025 (amended)Income-tax Act and Rules 2026Income Tax e-Filing Portal

Updated: 11 November 2026. This article is a general explanation; check applicable rules and notifications for individual circumstances.