One important kind of identification that the Income Tax Department of India issues is the Permanent Account Number (PAN) card. It links diverse financial activities by acting as a distinctive identifier for people and things.
But is it possible to operate a bank account or to even be financially active without one? That is precisely what is explored in this blog.
What’s the Importance of PAN Card in Banking?
- Within the banking industry, the PAN card is essential. It is required when opening a bank account since it aids in client identification and the correct recording of financial transactions by banks. In order to help with tax compliance and stop fraudulent activity, the PAN card is crucial for monitoring deposits, withdrawals, and other banking operations.
- Furthermore, high-value transactions like making significant cash deposits or writing checks that exceed certain limits require a PAN card. This aids in preventing tax evasion and monitoring significant financial transactions for the tax authorities.
Basic Savings Bank Deposit (BSBD) Account
Introduced by the Reserve Bank of India (RBI) to promote financial inclusion, the Basic Savings Bank Deposit (BSBD) account caters to individuals who do not possess a PAN card. It offers fundamental banking services with certain limitations.
Key features and limitations of BSBD accounts:
- Basic Banking Services: Although they come with limitations, BSBD accounts offer basic banking services like cash deposits and withdrawals, money transfers, and check deposits.
- Limited Balance: In order to promote financial inclusion and guard against speculative account abuse, the maximum balance that can be maintained in a BSBD account is capped.
- Limited Withdrawals: There are restrictions on the quantity and number of withdrawals that are permitted in order to preserve the account’s status as a basic savings bank account.
- No Overdraft Facility: In order to keep debt from building up, BSBD accounts do not provide overdraft services.
- Chequebook limit: The quantity of checks that can be written out for a BSBD account is limited in order to preserve the fundamental characteristics of the account.
- No Debit/Credit Card: Since debit and credit cards are linked to conventional savings accounts, BSBD account users are not eligible for them.
For those without PAN cards, BSBD accounts provide a bridge to formal banking; nonetheless, their features are more restricted than those of conventional savings accounts. Once you have a PAN card, you should upgrade to a standard savings account to take advantage of more banking services.
Converting a BSBD Account to a Regular Account
Converting a BSBD account to a regular savings account can only be done by getting a PAN card, and it offers several advantages:
- PAN Card Acquisition: You can start the conversion procedure as soon as you have a PAN card. As a result, you can now use a greater variety of banking services.
- Documentation: In order to finish the conversion, you might also need to provide other paperwork, such as evidence of address and identification, in addition to your PAN card.
- Account Upgrade: The restrictions placed on BSBD accounts will be lifted when the bank converts your BSBD account to a standard savings account.
- Enhanced Features: Higher transaction limits, a debit card, an overdraft facility (if qualified), and a checkbook facility are all available to you.
- Investment possibilities: By switching to a standard savings account, you can investigate the various investment possibilities that the bank provides, including mutual funds, recurring deposits, and fixed deposits.
- Online and Mobile Banking: These platforms give you access to cutting-edge financial services.
For precise instructions and requirements, it is essential to get in touch with your bank, as the conversion process may differ throughout banks.
How Does a PAN Card Facilitate a More Comprehensive Banking Experience?
A PAN card is required to access the entire range of banking services, even if BSBD accounts only provide the most basic financial services. This is the reason why:
- Comprehensive Banking Services: You can open a conventional savings account with a PAN card and have access to a number of additional features, such as a debit card, checkbook, and overdraft protection.
- Tax Compliance: PAN cards are connected to a number of financial activities and are required in order to file income tax returns. Possession of a PAN card guarantees adherence to tax laws.
- Large Transactions: A PAN card is needed for high-value transactions such as cash deposits or check writing that surpass certain thresholds.
- Financial Investments: Many financial institutions demand a PAN card to open an investment account, such as a fixed deposit, mutual fund, or insurance policy.
- Credit Cards and Loans: A PAN card is frequently required for identity verification and other reasons when applying for credit cards, loans, and other financial products.
Conclusion
While it’s possible to operate a basic bank account without a PAN card through the BSBD scheme, having a PAN card is highly recommended for accessing a full range of banking services. A PAN card is crucial for various financial transactions, including tax compliance and high-value transactions.