Difference Between TAN, PAN & TIN: Overview &Comparison

The Income Tax regulations are comprised of many jargons that signifies procedures, documents, and other rules that taxpayers are expected to comply with. Some documents are given acronyms which may make it even more confusing for the taxpayers.However, this article will shed light on 3 of the commonly used acronyms - TAN, TIN and PAN that denote documents related to Income Tax Regulations. These are all documents that serve varying functions like filing income tax returns, deducting and collecting taxes, generating payment challans and much more. Therefore, knowing their differences is essential.If a taxpayer fails to comply with the rules of applying for and using these documents in the right manner, penalties will be imposed. Therefore, it is crucial to understand what each of them entails and follow their regulations.This article will shed light on what the three of them are and how they differ from each other.

TAN stands for Tax Deduction and Collection Account Number. A TAN is a 10-digit ID that combines alphabetic and numeric characters. It is given to those who collect and withhold tax by the Income Tax Department. Section 203A of the Income Tax Act governs the rules pertaining to TAN. The TAN must be entered by TAN holders for any returns that are relevant to TDS (Tax Deducted at Source) or TCS (Tax Collected at Source). Those who hold a TAN must file quarterly TDS returns failing which they may have to pay interest and penalty.The TAN is made up of four letters, five numbers, and one letter at the end. The country where the TAN was issued is indicated by the first three letters. The first letter of the name of the organizationor person who is holding the TAN is represented by the fourth alphabet. The remaining characters are created at random by a machine.

Anybody who needs to collect TCS or deduct TDS must apply for a TAN. This typically includes organizations and individuals that own enterprises that require them to pay other taxpayers. Those who are required to collect tax at source must also follow these rules. In every TDS or TCS transaction, as well as the corresponding returns, challans, and certifications, every taxpayer or deductor must include their TAN. The following entities also have to apply for TAN:

1. Central Government Entities, State Government Entities, and Local Authorities
2. Companies registered under the Companies Act
3. A branch or a division of a registered Company
4. Individuals and HUFs that have to deduct or collect tax
5. A brand or a division of an individual’s business or profession
6. Partnership Firms, Association of Persons (AOP) and Trusts

TAN is necessary for a variety of activities connected to Income Tax laws. To complete the procedures, a TAN must sign in as a tax deductor or collector on the NSDL website. In the following documents, a TAN must be entered:

1. TDS returns or TDS statements.
2. TCS returns or TCS statements.
3. To facilitate payments or as proof of payments, use TDS challans .
4. To facilitate payments or as proof of payments, TCS challans.
5. TDS certificates must be delivered to the people or organizations from whom the tax was withheld.
6. TCS certificates must be given to the people or organizations from whose tax was collected.
7. For any other Income Tax Form, that would need to include information on the tax collector or deductor.

Not applying for a TAN or mentioning the incorrect TAN carries a serious penalty. Because of this, if someone is qualified to deduct or collect tax, they must make sure they have applied for TANs and have included the right TANs in their corresponding forms and certificates. The organizationor person that deducts or collects tax (TDS or TCS) without having a TAN or by providing an inaccurate TAN is subject to a penalty of Rs. 10,000 as per the regulations of Section 272BB of the Income Tax Act.

PAN stands for Permanent Account Number. A PAN is a 10-digit alphanumeric identity code that is unique to every taxpayer. It is mandatory for every Indian who carries our financial transactions to have a PAN. Taxpayers cannot pay Income Tax without having a PAN. Section 139A of the Income Tax Act issues and regulates the distribution of PAN. It is one of the most important identity documents for an individual and is presented for any tax-related transactions and other financial transactions. PAN is required for filing tax returns and tax payments and is even shared with deductors for the right deduction of TDS against the income of the taxpayer. Also Read: 7 Key Uses and Benefits Of a PAN Card and What More You Should Know The PAN consists of 5 letters followed by 4 numbers and a letter at the end. The first three letters are a random combination of AAA to ZZZ. The next fourth letter represents the nature of the taxpayer. It will be P for an individual, C for a company, G for a government agency and so on. The fifth letter stands for the first initial of the name of the taxpayer. The 4 digits are randomly generated, and the last letter is also randomly generated.

Every taxpayer who is earning income in any form and is subjected to tax has to apply for PAN. This covers individuals, firms, and companies as well. Typically, an individual should be 18 years of age to apply for a PAN, but if a minor is a nominee, then the legal guardians can apply for a PAN on behalf of the minor. The PAN is quoted by firms and companies for all financial transactions for deduction of tax.Anybody who needs to collect TCS or deduct TDS must apply for a TAN. This typically includes organizations and individuals that own enterprises that require them to pay other taxpayers. Those who are required to collect tax at source must also follow these rules. In every TDS or TCS transaction, as well as the corresponding returns, challans, and certifications, every taxpayer or deductor must include their TAN.

PAN is necessary for a variety of activities connected to Income Tax laws. The documents where a PAN may be used include the following:

1. Submitted for deduction of TDS or collection of TCS
2. As an identity proof
3. Purchase or sale of assets like motor vehicles, securities, houses, etc.
4. Income Tax Returns and payment
5. Opening a Bank account
6. Financial Transactions beyond a threshold
7. To apply for loans and check for credit score

If the PAN card of a taxpayer is not quoted for tax deductions, the tax deducted can be as high as 30%, and the taxpayer may not get a refund of the tax deducted. This is because the TDS details are available in Form 26AS , which is linked to the PAN. Not submitting a PAN will result in the service provider getting the net payment after a larger deduction. This is typically 30% instead of 10% or corresponding TDS rates, which are not as high as 30%. Since the deduction is not linked to the PAN of the taxpayer, a refund may be difficult to get.In case of failure to get a PAN card when the taxpayer should have applied for one, or if the incorrect PAN was submitted, a penalty of up to Rs. 10,000 can be charged to the taxpayer. This is mentioned in the provisions of the Income Tax Act in Section 272B.

TIN is an acronym for Tax Identification Number. It differs from PAN and TAN in many ways. This is an 11-digit number which is issued by a state’s Commercial Tax Department. It is a unique identification number that is given to businesses so that they can track their transactions. This number is required to be submitted for businesses that are registered under VAT. The TIN is used to identify the business when there is a movement of goods between two or more states and can help in monitoring the transactions and corresponding taxes. Since the introduction of GST, businesses have had to register for GST and obtain a GSTIN instead of a TIN for tracking transactions, filing returns, and making payments of GST. The GSTIN is quoted in the e-way bill through which the movement of goods between states can take place.The GSTIN consists of a 15-digit code mixed with letters and numbers. The state code is represented by the first two digits of the GSTIN's 15 digits. The PAN of the person or business organization is the next 10 digits. The thirteenth digit depends on how many times the company has registered under the same PAN within a state. By default, the fourteenth digit will be the letter "Z". The final digit, known as the "check code," is used to identify mistakes and may be represented by a number or an alphabet. Also Read: Ways to Check Status of Income Tax Refund or Filed Income

Typically, all types of businesses to whom VAT was applicable have to obtain a TIN. These normally include:

1. Dealers
2. Manufacturers
3. Traders
4. Exporters

The introduction of GST changed this requirement. Now, those who registered under the regulations of GST automatically get a GSTIN. Obtaining a GST registration is mandatory for the following businesses:Here is a quick recap on who should register for GST.For businesses undertaking the supply of goods, the exemption limit is Rs. 40 lakhs turnover per annum, except for the following states and UTs:

1. Arunachal Pradesh
2. Manipur
3. Meghalaya
4. Mizoram
5. Nagaland
6. Sikkim
7. Uttarakhand
8. Tripura

For entities operating in these states, the exemption limit for registration is Rs. 20 lakhs turnover per annum.Businesses undertaking the supply of services have an exemption limit of Rs. 20 lakhs turnover per annum, except for the following states and Uts:

1. Manipur
2. Meghalaya
3. Mizoram
4. Nagaland
5. Arunachal Pradesh
6. Sikkim
7. Uttarakhand
8. Tripura

For entities operating in these states, the exemption limit for registration is Rs. 10 lakhs turnover per annum.If a business provides a 100% supply of exempt goods or services, they are not required to be registered for GST even if they cross the threshold limit.

TIN (and now GSTIN) is typically quoted on the invoices of businesses and on e-way bills. The GST returns are filed by quoting the GSTIN of registered vendors and registered customers to create a comprehensive system of tracking transactions. Registered entities can get the input tax credit for the GST that they have paid. This can be netted off against the GST that they have collected and have to pay to the respective governments. The TIN and now GSTIN is a unique identification number of a business to track all transactions subjected to indirect taxes in India.

The penalty for TIN was set by the individual states since it was an identification number issued by the Commercial Tax Departments of the respective states. The penalty for not registering under GST goes up to 100% of the tax due or Rs. 10,000, whichever of the two is higher. There are many other penalties for different types of defaults that a registered entity may commit. Each of them has a distinct penalty mentioned in the GST regulations .

Here is a side-by-side comparison between TAN, PAN and TIN to make it easier for taxpayers to distinguish between the three.

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