PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) are essential 10-digit alphanumeric codes given by the Indian Income Tax Department, each with its own specific role in the tax framework.
Permanent Account Number (PAN)
Purpose: PAN acts as a universal identification key for all financial transactions and tax-related actions, aiming to monitor income and curb tax evasion.
Who Needs It: Mandatory for every taxpayer, including individuals, firms, companies, and even non-residents involved in taxable financial activities in India.
Usage: Required for filing income tax returns (ITR), opening bank accounts, purchasing property, investing in mutual funds, and conducting other high-value transactions.
Application Form: Residents in India utilize Form 49A, while foreign applicants use Form 49AA.
Penalty: Not obtaining or misquoting PAN may result in a penalty of ₹10,000.
Tax Deduction and Collection Account Number (TAN)
Purpose: TAN is specifically for entities that must deduct tax at source (TDS) or collect tax at source (TCS) on behalf of the government for payments made to others.
Who Needs It: Employers deducting TDS from salaries, businesses paying out rent, professional fees, or contractor payments exceeding specified thresholds, and any other bodies (including government agencies, banks) involved in TDS/TCS activities must obtain TAN.
Usage: Essential for quoting in all TDS/TCS returns (like Form 24Q, 26Q), payment challans, and certificates (such as Form 16/16A).
Exemptions: Individuals or Hindu Undivided Families (HUFs) not subject to tax audit can skip TAN if they deduct tax under certain sections (like 194-IA or 194-IB) and can instead reference their PAN.
Application Form: Applicants need to submit Form 49B.
Penalty: Failing to get a TAN or providing an incorrect TAN may incur a penalty of ₹10,000.
