PAN vs TAN: Key Differences You Should Know

Have you ever wondered why banks and other financial institutions ask for a PAN number while processing a long, but the employers ask for a TAN number for salary deductions? If you have ever felt confused between the two abbreviations, the blog post ahead is for you.

Table of Content

• What Is Pan?
• What Is A Tan Number?
• Key Differences Between Pan And Tan
• How To Apply For Pan?
• How To Apply For Tan?

Permanent Account Number, full form for PAN and Tax Deduction and Collection Account Number full form for TAN are both issued by the Income Tax Department of India, but they serve entirely different purposes. Salaried, tax-paying individuals and businesses handling TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) must understand the difference between PAN and TAN to ensure compliance with tax regulations. While the 10-character alphanumeric code, PAN, is used to track financial transactions and tax filings, a TAN number is mandatory for entities responsible for deducting or collecting tax on payments. Misusing or failing to obtain PAN and TAN can result in penalties from the Income Tax Department or even imprisonment.

If you wish to learn more about the two important abbreviations in India's financial identification systems labyrinth, including PAN and TAN no. meaning, example and much more, read the blog post further.

What Is Pan?

PAN, or Permanent Account Number, is a unique 10-character alphanumeric code issued by the Income Tax Department to salaried individuals, entities and businesses to track their tax-related transactions. The unique identification code is a universal tool for financial and tax-related activities.

PAN Number Example

A PAN number follows the format where the first five characters are alphabet letters, the following four are numbers and the last character is an alphabet. For example, AAAAA1234A.

Who Needs a PAN Number?

A PAN is mandatory for individuals who file income tax returns, businesses and companies operating in India, NRIs and foreign investors earning taxable income in India and professionals and freelancers dealing with high-value financial transactions.

Uses Of Pan

PAN has a multitude of uses. An individual can apply for a PAN card if they are:

• Filing Income Tax Returns (ITR) on a financial year basis.
• Opening a bank account or a Demat account.
• Buying or selling a property above INR 50 lakh.
• Investing in mutual funds, bonds and stocks.
• Applying for a loan, debit or credit card.
• Carrying out high-value financial transactions.

Suggested Read : Top Uses Of A Pan Card: A Comprehensive Guide

What Is A Tan Number?

Like PAN, Tax Deduction and Collection Account Number, the full form for TAN is also a 10-character alphanumeric code issued by the Income Tax Department. The difference is that TAN is issued to businesses and entities responsible for deducting TDS or collecting TCS. It ensures that tax deducted or collected from payments is deposited with the government for smooth financial transactions.

Tan Number Example

A TAN number follows the format where the first four characters are alphabet letters, the following five are numbers and the last character is an alphabet. For example: ABCD12345E.

Who Needs A Tan?

Having a TAN is mandatory for employers who deduct TDS from salaries, businesses collecting TCS from customers, banks deducting tax on interest earned and companies paying professional fees, royalties or commissions.

Uses Of Tan

TAN has several uses for businesses and entities handling tax deductions and collections, ensuring smooth compliance with the government. The key uses of TAN include:

• Filing TDS and TCS returns.
• Issuing TDS certificates to employees/vendors.
• Ensuring tax law compliance and avoiding penalties.

Key Differences Between Pan And Tan

In case you are still confused between the two terminologies, the table ahead will clear all your doubts.

How To Apply For Pan?

Applying for PAN is a straightforward process. All you need to do is:

• Visit the NSDL or UTIITSL website and find “Apply for PAN.”
• Fill out Form 49A (for Indian citizens) or Form 49AA (for foreign applicants who are earning taxable income in India)
• Provide valid identification documents and address proof.
• Pay the application fee.
• Receive the PAN number after a successful application and verification.

Suggested Read: Apply For Pan Card Online – Fast & Easy Process

How To Apply For Tan?

Employers or businesses handling TCS/TDS can follow the steps below to apply for TAN.

• Visit the official website of NSDL.
• Fill out Form 49B with business details.
• Provide all the necessary supporting documents.
• Pay the processing fee.
• Receive the TAN number upon successful completion and approval of the application.

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