The terminology associated with income tax can be confusing, as many terms sound alike but have different meanings.
Having a basic understanding of the various terms we encounter when filing our taxes or contacting the Income Tax Department for clarification can simplify the entire process, giving us valuable insights.
The terms PAN and TAN are some of the most commonly used terms in taxation.
A PAN is a Permanent Account Number, and a TAN is a Tax Deduction Account Number. It is vital to submit PAN and TAN documents for various reasons, such as filing income tax returns, withholding and collecting taxes, and trading.
It is a violation of card-based provisions if a person fails to obtain a PAN or TAN. The same will happen if these people do not comply with the required card-based provisions and thus they will incur penalties.
Additionally, these documents should be cited clearly whenever they are needed. It is also important to keep in mind that these two are also incompatible and cannot be substituted for one another.
Here we'll look at the differences between the TAN and PAN in more detail.
Every taxpayer or assessee in the country is provided with a Permanent Account Number or PAN. Generally, it's a requirement for all entities engaged in economic activity in the country that exceeds a certain financial threshold.
Certain conditions must be met before it can be issued to foreigners or foreign entities. In order to conduct financial transactions, you must have a PAN.
Furthermore, an individual's identity is verified by this document. Even in the case of income tax, it serves as a record.
Assets such as cars, property, and houses are also purchased or sold with a PAN. An individual's PAN is valid for their entire lives and is valid throughout India.
The PAN identification remains the same regardless of an assessee or an assessing officer's address change.
You can obtain a PAN by visiting either the NSDL or UTIITSL official websites. There are two forms available on both sites for applying for a PAN.
Applicants for Form 49A must be Indian citizens, while applicants for Form 49AA must be foreign nationals. In-person applications for PAN cards are also possible.
Follow the instructions on the official website of the NSDL to complete the form. The applicant must also provide documentation proving their address and identity.
For PAN applications, the following documents are required by the respective bodies:
The applicant must submit a copy of his or her Aadhaar, passport, voter ID, and driver's licence (POI or POA).
In the case of Hindu Undivided Families, a signed HUF affidavit, including POI/POA information, is required.
Documents related to the company including Company's Registration Certificate.
Partnership Deed and Certificate of Registration issued by the Registrar of Firms/ Limited Liability Partnerships (LLP).
Copies of the Trust Deed and the Charity Commissioner's Certificate of Registration Number are required.
A Certificate of Registration number may be obtained from the Registrar of Co-operative Societies or the Charity Commissioner.
An identification card issued by the Indian Government, a passport, an Overseas Citizenship of India (OCI) card, a bank statement from the country of residence in India, and a copy of an NRE bank statement are necessary documents.
PAN cards can be applied for by an individual who has a taxable income, Citizens of foreign countries, Students, non-taxpayers, and foreign entities.
A TAN is a unique 10-digit alphanumeric code used primarily for tax deductions and collections. TDS and TCS documents must cite a TAN for every entity deducting or collecting tax.
Section 203A of the Indian Income Tax Act of 1961 provides access to the system for tax deductors or collectors. In order to make TDS payments, make TDS returns, and submit challans, you need the TAN.
Failure to obtain a TAN card will result in a tax of Rs. 10,000.
Companies must file quarterly TDS once they have obtained the TAN.
Income tax guidelines require property buyers who own properties worth more than Rs 50 lakh to deduct TDS at 1% of the value.
TANs are not required in such circumstances for property buyers. In this case, you can indicate your PAN while making the deduction and filling out the TDS return.
In addition to applying online, applicants can also apply in person. The application form can be completed online by logging into the official NSDL website. Upon submitting the application, the applicant will receive an acknowledgement number with 14 digits.
A fee must be paid at the NSDL office with the acknowledgement number and supporting documents. An applicant can apply for a TAN offline by visiting NSDL centres and submitting the TAN application form, all necessary documents, along with a fee.
When applying for a new TAN, applicants are not required to provide any documentation. In addition, if they apply online for a new TAN, the only document they need to send is a signed acknowledgement slip.
There are many types of organisations that can apply for a TAN, including the government, state/local authorities, companies, divisions of companies, branches of individual companies, firms/associations of individuals/trusts, and individuals/HUFs.
A PAN is a ten-digit code assigned to the assessee when registering with the Information Technology Department for financial transactions beyond a certain threshold whereas a TAN code is a ten-digit alphanumeric code assigned to tax deductors or collectors.
In terms of PAN, Indians must apply in Form 49A and foreigners in Form 49AA, while TAN applicants need to apply in Form 49B.
A TAN is issued under section 203A of the Income Tax Act, 1961 while a PAN is issued under section 139A.
TAN is required for the assessee who is liable to deduct or collect taxes from anybody, whereas PAN is required for filing an IT return.
Unlike TAN, a PAN card acts both as a means of identification when performing financial transactions and as an identity proof of a person throughout India.
Income tax and sales tax forms must be filled out by an assessee with a unique identification number. The unique identification number should also be mentioned whenever they carry out different tax activities.
PANs and TANs differ primarily in terms of filing procedures and purposes for them. It is essential for every entrepreneur to have these numbers in order to conduct business.
Ans: The application form can be completed online by logging into the official NSDL website.
Ans: No. It is not allowed or legal to hold two TAN cards.
Ans: The price of a PAN card is Rs 100.
Ans: You can expect your TAN card within 5 working days.
Ans: TAN stands for Temporary Account Number.
Ans: PAN stands for Permanent Account Number.
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