What is PAN and TAN? What is the difference between the two?

What is PAN And TAN : If TDS is deducted on your salary, then the company also gives you its TDS certificate (Form 16). In this certificate, along with your PAN number, the TAN number of the company is also mentioned. But, do you know what is a TAN number? In this article, we will answer this and also explain what is the difference between PAN and TAN number? What is PAN and TAN. What is the difference between PAN and TAN in Hindi? 

What is PAN and TAN? 

PAN stands for Permanent Account Number,  while TAN stands for Tax Deduction and Collection Account Number . The Income Tax Department of India issues both the PAN number and the TAN number.

PAN number is also known as Permanent Account Number in English. In simple language, it can also be called tax account number, because the details related to income and tax payment of a person throughout the year are recorded in the tax account number linked to the PAN number. At the end of the year, the income tax return is also filed with the help of this PAN number. 

TAN number can be called tax deduction number, because it is issued to those companies or institutions, which have the right to deduct tax (TDS or TCS) while giving income to someone. After deducting TDS, it is mandatory to mention the PAN number of the TDS deductee as well as the TAN number of the TDS deductor in the certificate issued for him.

structure of pan card number

An alphanumeric number (a number consisting of the letters abcd and the counting digits) is a 10-digit number. Each PAN number consists of 10 digits as per the following format- ABCTY1234D. Each digit contains hidden information about the PAN account holder, such as-

  • First three digits: These are made up of a series of letters ABCD. These three characters can be any three capital letters from AAA to ZZZ.
  • 4th digit : It tells your professional status like
    • P: stands for Individual Taxpayer
    • H: For HUF category people
    • C: stands for company
    • F: stands for firm
    • T: stands for trust
  • Fifth digit: Represents the first letter of the PAN card holder’s name, such as L for Latika and R for Ravi
  • 6th to 9th four digits: These are the four digits of any number, which represent sequence numbers only.
  • 10th digit: This is the check digit and can be in the form of any alphabet. The check digit is automatically determined by the computer system after assessing your other details

Structure of TAN Number

  • First three characters: The first three characters of the TAN number represent the jurisdiction code. to which the person or company holding the TAN belongs 
  • Fourth digit: The fourth digit of the TAN number is the first letter of the name of the person or company holding the TAN.
  • Five characters : These are unique i.e. different for each TAN number. 
  • Last letter : This is any letter of the English alphabet, which is automatically determined
  • For example, the TAN number of a person named Bhanu Pratap residing in Delhi can be as follows- DELB23241G

Features of PAN Card Number

  • Records of all types of tax payments (TDS or TCS or advance tax, assessment tax, etc.) and other such important transactions made by a person or organization are stored in the PAN number based Tax Account of that person only.
  • It is mandatory to enter the PAN number in transactions above a certain amount (usually Rs 50,000). PAN number has also been made mandatory for opening bank accounts and investing money in investment schemes. However, this condition is exempted in the Basic Type Bank Account (BSBA) for the poor class people.
  • All government and private organizations accept PAN card as a proof of identity (Personal ID Document) in the KYC process.

    Features of TAN Number

    • Like PAN, TAN is also a unique identification number, that is, it can be unique and only one for each person.
    • It is mandatory for any tax deductor or tax collector to have a TAN, even if he has a PAN.
    • It is mandatory to enter TAN number in the following cases-
      • Filing of TDS or TCS related returns (also online e-TDS/TCS return filing)
      • TDS or TCS in challan form for deposit with the government
      • In issuing its certificate after deducting TDS or TCS
      • Filing of AIR Report (Annual Information Return) in respect of significant transactions
      • Other such documents, in which it is mandatory to mention TAN number as per rules

    For whom is TAN number required?

    The following categories of people can apply for a TAN card-

    organization established under the companies actCompany
    Central government or state government or local level organizations that pay in exchange for any work (contract or job work).Central/State Government/Local Authority
     statutory or autonomous bodyStatuary/Autonomous Bodies:
    branch of a companyBranch/Division Of Company
    Individual or HUF BusinessIndividual/Hindu Undivided Family
    Branch of individual or HUF businessBranch Of Individual Business (Sole Proprietorship concern)/Hindu Undivided Family (Karta)
    Registered firm, association, or body recognized as artificial juridical personFirm/Association Of Persons/ Association Of persons (Trusts)/ Body Of Individuals/ Artificial Juridical Person:  
    branch of a registered firm, association, or entity recognized as an artificial juridical personBranch Of Firm/Association Of Persons/ Association Of persons (Trusts)/ Body Of Individuals/Artificial Juridical Person: 
    What is PAN and TAN
    What is PAN and TAN
    What is PAN and TAN

    PAN has to be quoted instead of TAN when buying a property

    As per Section 194IA of the Income Tax Act, it is mandatory to deduct TDS on sale or transfer of certain immovable assets. Other than agricultural land. But it is not mandatory to have TAN number for deducting TDS in such cases. In these transactions the tax deductor (buyer) can use his PAN number instead of TAN number.

    What is the difference between PAN and TAN?

    Both PAN and TAN are 10 digit unique codes and both are issued by the Income Tax Department. But there is a difference between their use such as-

    Difference in eligibility to apply

    • PAN is issued to every person who has income from the resources of the country. Whether his income is eligible to pay tax or not. It is also mandatory for those earning more than a basic tax exemption limit to have a PAN number.
    • TAN is issued only to those individuals or entities that are eligible to deduct or collect tax on financial transactions.

    Difference in Apply Form for release

    • An individual or entity has to fill form 49A (for Indian citizens) or form 49AA (for foreign citizens) to get a PAN number issued.
    • To get TAN number (Tax deduction and collection Account Number) issued, that person (individual) or entity (entity) has to fill form 49B.

    Mention difference with payments

    • The need to quote PAN number is mainly required while preparing Income Tax return and then submitting it. Through PAN, you deduct the tax liability on your income and deposit it with the government yourself.
    • Quoting of TAN number is required for deducting tax or collecting tax on any payment or transaction of specified nature. Later it has to be deposited with the government and then it has to be accounted for through returns.

    Issuance rule difference

    • PAN number is issued under section 139A of the Income Tax Act 1961 .
    • TAN number is issued under section 203A of the Income Tax Act 1961 .

    Note: 

    It is mandatory to deduct TDS under section 194A in case of purchase and sale of land or building (above a certain value). In such cases it is not mandatory for the deductor to have TAN. Instead, he can also deposit TDS through his PAN .

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    so friends! This was the important information about PAN number and TAN number. For other useful information related to money, see our articles-

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