To ensure a stronger surveillance system for any wrongdoing in the marketplace, stock exchanges may soon be asked to maintain a database of Permanent Account Number (PAN) of all promoters of the companies listed on their platforms.
A proposal for asking the stock exchanges to maintain a database of all promoter PANs for listed companies is currently under consideration of capital market regulator Sebi’s Integrated Surveillance Department (ISD), a senior official said.
This Department undertakes surveillance meetings with stock exchanges, clearing corporations on a regular intervals for various policy initiatives and other market intermediaries are also involved whenever required.
Besides helping in implementation of enforcement action against promoters and other entities, the regulator feels, PAN can also be useful in ensuring a better surveillance mechanism and therefore a database of PANs of all promoters of listed companies can be of great help.
Issued by the Income Tax Department, PAN has become a very useful tool in the surveillance functions of market authorities to identify the concerned entities and their transactions.
PAN is a ten-digit unique alphanumeric number, issued in the form of a laminated card to a person, and it enables the department to link all transactions of that person or entity.
These transactions include tax payments, TDS/TCS credits, returns of income/wealth/gift/FBT, specified transactions, correspondence, and so on.
PAN, thus, acts as an identifier for the “person” with the tax department, while other authorities also make similar use of this.
While PAN was mainly introduced to facilitates linking of various documents, including payment of taxes, assessment, tax demand, tax arrears etc, it is also used for detecting and combating tax evasion and widening of tax base.
The typical selection of alphabets and numbers in PAN makes it further effective in identifying the person to whom it has been issued. While the first three characters represent a running series, the fourth character refers to the status of the PAN holder—“P” stands for Individual, “F” stands for Firm, “C” stands for Company, “H” stands for HUF, “A” stands for AOP, “T” stands for TRUST etc.
The fifth character represents first alphabet of the PAN holder’s last name or surname. The next four characters, which are numeric, are a sequential number running from 0001 to 9999. The last character in a ten-digit PAN is an alphabetic check digit.
Besides in dealings with the Tax Department, quoting PAN is mandatory in various financial transactions including for all transactions in the securities markets.