What are PAN and TAN?

Permanent Account Number (PAN)

PAN stands for Permanent Account Number and is assigned to all taxpayers in India as it serves as a unique identification number. It is a single, electronic system that stores all tax-related information for a company or individual taxpayer. It stores all the information pertaining to the taxpayer and serves as a primary key, which can be shared with various authorities across the country as required. There cannot be more than one assessee holding one PAN, as it is unique for each assessee and assigned in such a manner that there is no repetition or duplication.

Eligibility

PAN Card can be issued to any company, individual, NRI (Non-Resident Indians), company, or assessee who is liable to pay tax in India.

Structure of a PAN Card

PAN Card stores information with respect to one’s identity and age proof, and it helps in complying with the Know Your Customer guidelines. Details which are included in the PAN Card are as follows:

1. Cardholder’s Name, whether it is an Individual, company, firm, or such other assessee.
2. The cardholder’s father’s name shall be applicable in the case of an individual.
3. Date of birth is in the case of an individual, and date of incorporation or registration is in the case of another assessee.
4. PAN is the unique number assigned to the assessee. It is nothing but a 10-letter alphanumeric number. In this, each of these 10 letters represents clear information pertaining to the cardholder. The same has been explained below:

Take the example of AYDPC0123P

• The first three letters are purely alphabetical and will be random letters from within A to Z.
• The fourth letter represents the classification of the taxpayer, which is again as below:

1. A – Association of Persons.
2. B – Body of Individuals.
3. C – Company.
4. F – Firms.
5. G – Government.
6. H – Hindu Undivided Family.
7. L – Local Authority.
8. J – Artificial Judicial Person.
9. P – Individual.
10. T – Association of a person or trust.

• The fifth letter represents the initial of the cardholder, which is an individual’s surname.
• The remaining letters are randomly based, where the first four are random numbers while the last one is an alphabet.

1. Signature shall be present on an individual’s PAN Card, which might also be needed in some of the financial transactions in which such individual shall be involved.
2. A photograph shall also be present in case of an individual as an identity proof, and this shall not be present in case of a company, firm, or any other assessee.

TAN or Tax Deduction Account Number

TAN stands for Tax Dedication Account Number, and the Income Tax Department issues it under the Central Government. It is a 10-digit alphanumeric number and is issued to every person who is liable to deduct TCS (tax collected at Source) or TDS(Tax Deducted at Source). This is a unique number, and as per section 203A of the Income Tax Act, the TAN number shall have to be written on every TDS return filed by the assessee.

Eligibility

TAN can be issued to an individual, company, firm, or other assessee liable to deduct or collect TDS and TCS.

Structure of TAN

Here, there will be many details which are encoded by using a combination of letters as well as numbers, and the details of the same are given below:
Take an example of TAN as ZDEP01011E

• The first three letters of TAN represent the jurisdiction code of the holder.
• The fourth letter is the initial of the name of the holder.
• The fifth letter is the single identifying number, and it has no additional significance.
• The last letter is the alphabet, and it is a unique identifying entity.

Difference between PAN and TAN

There are some significant differences between PAN and TAN, and some of them are discussed below:

1. Every taxpayer requires PAN, but in the case of TAN, it is applicable to individuals or assessee who pay or collect TCS or TDS.
2. The governing law of PAN is section 139 of the Income Tax Act, while in the case of TAN, it is section 203A of the Income Tax Act.
3. The primary purpose of owning a PAN is that it serves as a comprehensive code, granting permission for all financial transactions. At the same time, TAN simplifies the TDS collection and remittance procedure.
4. The forms that are necessary in case of PAN are as follows:

– In the case of a citizen of India, Form 49A shall apply.
– In case of others or foreigners, Form 49AA shall apply.

The necessary form in the case of TAN is Form 49 B. It should also be noted that there are certain similarities in the case of PAN and TAN, amongst which the major ones are listed below:

1. The maximum number of PANs and TANs that an assessee can hold shall be limited to one.
2. The Income Tax Department of India issues both of them.
3. The identifying codes of PAN and TAN are 10-digit alphanumeric codes.