The income tax department is set to offer depository participants (DPs) the service of verifying permanent account numbers (PAN) of clients opening demat accounts. DPs will have to register with the IT department which, in turn, will do the verification of PAN through an automated IT platform. The window that will be opened for DPs will be similar to the one provided to banks and other institutional investors such as stock exchanges.
With the growing use of PAN by agencies other than the income tax department, it is imperative to have an institutional arrangement for batch verification, said a senior official. All categories of investors opening demat accounts have to quote their PAN numbers. Even existing account holders wont be able to operate their accounts if they dont produce their PAN cards. A Sebi directive issued last year also placed the onus on DPs to verify the name of the demat account holder with the name appearing on the website of the I-T department.
A retail investor can have multiple demat accounts. But he cannot put in multiple applications with different permutations and combinations of his name while subscribing to an IPO. Similarly, it is not illegal for an individual to have multiple savings accounts.
But they will carry the same PAN. The service of PAN verification offered by the income tax department will help spot manipulation, if any, of demat and savings bank accounts by retail investors trying to corner a large chunk of shares in any IPO.