How Is PAN Different from TAN in India?

PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) are two distinct identification numbers issued by the Income Tax Department of India for different purposes. While both are related to tax compliance, their use, format, and holders differ significantly.

• Purpose and Function

• PAN is used to track all financial and income tax-related transactions of individuals and entities.

• TAN is required by persons or entities responsible for deducting or collecting tax at source (TDS/TCS).

• PAN helps in identifying taxpayers and linking their income, investments, and tax payments.

• TAN is used by deductors to deposit TDS and file TDS returns with the government.

• Applicability and Holders

• PAN is mandatory for all taxpayers including individuals, companies, firms, and HUFs.

• TAN is mandatory only for employers, companies, or organizations that deduct tax at source.

• An individual earning salary will require PAN, but only needs TAN if deducting TDS (e.g., on rent payments).

• Most salaried individuals need PAN, while TAN is used by organizations and deductors.

• Format and Structure

• PAN consists of 10 alphanumeric characters (e.g., ABCDE1234F).

• TAN also consists of 10 characters but follows a different structure (e.g., MUMT12345E).

• The first four characters of TAN represent the jurisdiction and office code.

• The formats help distinguish PAN and TAN easily for regulatory purposes.

• Filing and Compliance Use

• PAN is used to file income tax returns, claim refunds, and report financial transactions.

• TAN is used to file TDS/TCS returns, generate TDS certificates (Form 16/16A), and make TDS payments.

• PAN is linked to Form 26AS and individual tax accounts.

• TAN is used in Form 24Q, 26Q, and other TDS statements submitted by deductors.

• Issuing Authorities and Application Process

• Both PAN and TAN are issued by the Income Tax Department under the Central Board of Direct Taxes (CBDT).

• PAN is applied using Form 49A (Indian citizens) or Form 49AA (foreign citizens).

• TAN is applied using Form 49B and is processed through NSDL or UTIITSL portals.

• Separate application processes and documentation are required for each.