Are you a taxpayer constantly baffled by the numerous cards and numbers that you are supposed to hold? Are all these government formalities reducing your ease of doing business? If they are, this article is going to help you for sure. All of your queries regarding PAN, TAN, and TIN will be resolved here. This article will cover the fundamental definitions, functions, benefits, relevant government policies concerning PAN, TAN, and TIN numbers. And if you want to apply for any of these, let us walk you through the process.
What is PAN?
PAN is an acronym for ‘Permanent Account Number’. It is a ten-digit code comprising alphabets and numbers, given to any individual who applies for it or if the income tax department assigns you one. The government issues it to maintain the record of all transactions done by the holder of this card. In short, PAN is used to keep track of all transactions done by an individual, a firm, or any tax-paying entity. It is unique to everyone, so no two tax-paying units can have the same PAN.
Any individual, firm, or any tax-paying entity is eligible to apply for a PAN card.
The process of applying for a PAN is simple enough. It is divided into four easy steps:
- Visit the official PAN website. (NSDL, UTIITSL website)
- Fill the given form with your details.
- Submit all the required documents. ( You will need two documents, proof of identity and proof of address).
- Pay the processing charges.
And the PAN will be delivered within 15 days.
A PAN card has a wide range of uses for the holder, but it was mainly devised by the government to prevent tax evasions. The functions of a PAN card are as follows:
- It serves as a proof of identity and a proof of address.
- It is compulsory for paying taxes.
- It facilitates the registration of a business.
- It is important for financial transactions as well as for opening a bank account.
- It is needed to apply for a phone and gas connection
- Mutual funds- If you invest in mutual funds, PAN makes the process of e- KYC in mutual funds easier.
- If there are any accidental tax deductions, a PAN card is also useful in claiming income tax refunds.
No person can hold two PAN cards; it is a punishable offense and can attract a fine of Rs. 10,000.
What is TAN?
TAN or Tax Deduction and Collection Account Number is a ten-digit code consisting of numbers and alphabets used to deduct taxes from a taxpayer’s account. It is issued by the income tax department of the country. Now you may wonder, what is the difference between pan and tan?
The most basic difference between PAN and TAN is that while PAN is used to keep track of financial transactions made by the holder, TAN is used to deduct tax from the holder’s account.
According to the income tax department of India, TAN is to be held by everyone responsible for paying tax as well as collecting tax.
The process of applying for TAN can be broken down into the following steps:
- Visit the website www.tin-nsdl.com/index.html
- From the services dropdown on the page, select ‘TAN’.
- Choose ‘Apply Online.’
- Click on New TAN.
- Press ‘Select’ on the category of' deductors'.
- Fill out the form and click Submit. (No documents are required)
- You will see an acknowledgment screen, take a printout of it, as it will be required when you submit your application at NSDL.
TAN serves the major function of tax deductions for the income tax department. But apart from that, TAN also serves the following purposes:
- TAN has to be quoted on TCS (Tax Collection Source) or TDS (Tax Deduction Source) return, payments, certificates, and annual information return.
- It is used for deductions of salary, interests, and dividends.
- It should be quoted on returns, challans, and certificates.
- It can be used for filing tax returns and for generating challans and certificates.
- The income tax department also uses it to capture data like name, address, and postal index number of the cardholder.
According to the rules and regulations set by the government, it is important to quote TAN on all the documents mentioned in the uses section above. Otherwise, one could incur penalties. So, to save yourself and your business from penalties, it is important to hold a TAN card.
What is TIN?
TIN is the abbreviation used for Taxpayer Identification Number. It is an eleven-digit numeric code used for people involved in trading where VAT is applicable. TIN is also referred to as VAT number or Sales Tax Number. Now, the difference between TAN and TIN is; while TAN is used for tax payment, TIN is needed by traders involved in inter-state trading, which attracts VAT. It is issued by the commercial tax authority of the state.
All traders involved in interstate trading or in a trade that attracts VAT are supposed to have a TIN.
You can apply for the TIN number either online and offline. The procedure for applying for a TIN differs from state to state. TIN is compulsory for all transactions involving VAT. Hence, the number is provided immediately upon registration.
The major function of TIN is to facilitate trade between different states by providing an identification number to traders coming under this category. Other functions of TIN can be given as follows:
- TIN is mandatory for interstate purchases and sales of goods and services.
- TIN has to be registered while applying for VAT by manufacturers, exporters, dealers, and traders of goods and services.
- TIN is required for hassle-free transactions subjected to VAT, CST, and TIN.
If the TIN number is not registered in transactions requiring it, an individual is liable to penalties fixed by the commercial tax department of the concerned state.
Difference between PAN, TAN, and TIN
As we have gone through all the vital information about TIN, TAN, and PAN, let us go through the differences between the three.
1. PAN and TAN are issued by the income tax department, while the commercial tax department issues TIN.
2. PAN card is a universal and unique identity proof that keeps a record of all the transactions made by the taxpayer. TAN is used for the deduction as well as the collection of taxes. TIN, on the other hand, is used for carrying out all transactions where VAT is applicable.
3. Penalties regarding PAN and TAN are 10,000 while the concerned states fix penalties involving TIN.
4. PAN has to be owned by all taxpayers, while TAN has to be owned by everyone involved in the deduction or collection of tax. TIN has to be owned by everyone involved in a trade that attracts VAT.
5. The cost of applying for PAN is 110 Rs., for TAN it is 55 Rs., for TIN it varies from state to state.
6. Document requirements differ for each of them. For PAN, proof of identity, proof of address, passport size photographs, and a birth certificate are needed. NO documents are required for TAN, while for TIN, a PAN card is needed.
7. PAN and TAN are ten-digit alpha-numeric codes, while TIN is an eleven-digit numeric code.
In conclusion, there are several core differences between PAN, TAN, and TIN. Their functions can be confusing because all of their purposes involve tax. But if explained precisely, they are easy enough to understand. A similarity between all of these documents is that if you carry them, your transactions and business-related activities become smoother, you save yourself the trouble of getting involved in unnecessary legal procedures, and most importantly, play your role as a responsible citizen of the country.
We hope you will soon apply for these documents if you are eligible and still don’t have them. And while you are at it, is the maintenance of accounts and ledger books getting tedious for you, or are you constantly bothered by maintaining salary slips and attendance registers for your employees?
Are these important but monotonous tasks taking the fun out of doing business? Don’t worry, OkCredit and OkStaff have got you covered. Download these apps today, and get these problems right out of the way.
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Q. What documents are required for a PAN card?
Ans. The documents required for a PAN card are proof of address, proof of identity, birth, and passport size photos.
Q. How to apply for TIN?
Ans. The TIN is usually generated automatically for all transactions that attract VAT.
Q. How can TIN, TAN, and PAN help a business owner?
Ans. TIN, TAN, and PAN can make transactions easy, help one avoid legal hassles, and help one acquire the benefits of being a taxpayer.
Q. What are the benefits of having a PAN card?
Ans. A PAN card is necessary for opening a bank account, for business transactions, for filing income tax returns, and so on.
Q. What is TAN?
Ans. A TAN card is used for the deduction of tax from the card holder’s account.
Q, What is PAN?
Ans. A PAN card is used to maintain a record of transactions made by the holder of the card by the country’s income tax department.
Q. What is TIN?
Ans. A TIN is used for carrying out transactions that attract VAT.