Difference Between PAN and TAN

04 Sep, 2019

What is PAN?

PAN is the type of computer-based system which assigns a unique identification number to a taxpaying entity in India. PAN is shared across the country and hence no two people on tax paying entities can have the same PAN. Once PAN is issued it will be valid for the entire lifetime and it is unaffected by a name change, address change within or across states in India, however, it should be intimated to the department by furnishing the details in the form for ’Request For New PAN Card Or/ And Changes Or Correction in PAN Data.

What is the Need of PAN?

The main objective of PAN is that it is used to use as an identification key to track financial transactions^[1] that might have a taxable component to prevent and reduce tax evasion, recognition of fraudulent transactions, transparency in transactions between buyer and seller.

It has been made mandatory to quote (PAN) on challans for any payments due to Income Tax Department (ITD) while filing returns of income and all correspondence with any income tax authority. Thus Purpose of having Pan Card has become mandatory. It serves as a proof of identity and now been made mandatory for a number of transactions of both a business as well as a personal.

Application for PAN Card can be made either online at the NSDL website^[2] or by applying at any of the district level PAN agencies and for new PAN allotment as well as those for correction or change of information can also be made by customers. The Department has mandated that all taxpaying entities register and possess a PAN card and applies it to individuals, companies, Partnership Firms, NGO’s as well as foreign firms also come under the purview of this directive.

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What is TAN?

TAN is a 10 digit number issued to persons who are required to deduct or collect tax on payments made by them under the Indian Income Tax Act 1961^[3]. It is allotted to all those persons who are required to deduct tax at the source of income. It is mandatory to quote TAN on all TDS.

An employer, who needs to deduct tax at source from employees’ income under section 192 of the Act, needs to have a TAN. Failure to apply TAN when required can attract a penalty. Once TAN is obtained, TDS Returns must be filed quarterly by the business. Every individual liable to deduct tax at source or collect tax at source is required to obtain TAN. However, a person required to deduct tax under section 194IA can use PAN in place of TAN as such a person is not required to obtain TAN.