Difference between PAN and TAN

The permanent account number (PAN) and the tax collection and deduction account number (TAN) are unique alphanumeric identification codes allotted by the income tax department of the Indian government to facilitate collection of tax. Where PAN pertains to the unique code assigned to tax-payers, TAN is allocated to entities which are liable to deduct or withhold tax from amounts payable under the income tax act, 1961. Both these unique identification codes serve different purposes under the tax regime in our nation, which makes it essential to understand the difference between the two.
 

What is PAN?

Permanent account number, better known as PAN is a unique alphanumeric code assigned by the income tax department to all the persons liable to pay income tax to the government for carrying on financial activities over a specified threshold. PAN is allocated by the income tax department in the form of a card known as a PAN Card which bears the permanent identification number. The PAN aids in facilitating the interaction between the income tax department and assesees under the income tax act, 1961 which includes payment of tax and also filing for income tax returns.
 

What is TAN?

The tax collection and deduction account number or TAN, is a unique alphanumeric identification code, which is assigned by the income tax department to individuals and entities which are liable and accountable to deduct and/or collect tax at the source. It facilitates collection and deduction of tax at source and is essential to the process of filing tax deducted at source (TDS) and/or tax collected at source (TCS) returns. Therefore, for every correspondence with the income tax authority for the purpose of either TDS or TCS, the allotted TAN is required to be quoted. A PAN cannot serve the purpose of a TAN, therefore, even if a person liable to deduct/collect tax is in possession of a PAN, he is still legally required to apply and obtain a TAN under the provisions of the Income tax act, 1961.
 

What is the difference between PAN and TAN?

The following are the essential points of distinction between permanent account number and tax collection and deduction account number:

1.       PAN is a unique alphanumeric code assigned by the income tax department to every assessee who is liable to pay tax to the government for carrying on financial activity above a specific threshold limit. TAN on the other hand is an alphanumeric code assigned by the income tax department to every such entity which is liable to deduct and/or collect tax at the source.
 

2.       The forms which are to be duly submitted and filed for individuals seeking a PAN or TAN are also different. While a PAN can be applied for by way of form 49A, TAN can be obtained upon submission of FORM 49B.
 

3.       PAN permits the collation and common identification for all financial purposes and transactions in regard to the income tax department. TAN on the other hand is utilised to provide tax TDS details collected by an entity.
 

4.       PAN is allotted to taxpayers by the income tax department, whereas TAN is allotted to those who deduct tax.
 

5.       PAN is essential in the process of facilitation filing of income tax returns. Whereas, TAN is needed for entities which are legally liable to withhold or deduct tax from the sums payable as per the income tax.
 

6.       PAN and TAN are both provided for under the income tax act, 1961. Where PAN is allotted to persons under the provision of Section 139A of the income tax act, TAN is allotted under Section 203A of the act by the income tax department.