Us Companies: Tan And Pan Compliance

In India, a Tax Deduction and Collection Account Number (TAN) is a 10-digit alphanumeric identification number issued by the Income Tax Department. It is used for tracking tax-related transactions such as filing TDS/TCS returns and is required by individuals or entities that are responsible for deducting or collecting tax. A Permanent Account Number (PAN), on the other hand, is a 10-digit identity number issued to taxpayers by the same department. It is used for identification and tracking of financial transactions such as opening bank accounts, filing tax returns, etc. and is required for all individuals who carry out financial transactions or pay income tax. While TAN is valid for one financial year and needs to be renewed annually, PAN is permanent and does not expire.

Who needs a TAN number?

A TAN number is a 10-digit alphanumeric identity number issued by the Income Tax Department in India. TAN stands for Tax Deduction and Collection Account Number.

Any individual or entity that is responsible for deducting or collecting taxes at source (TDS or TCS) must obtain a TAN number. This includes companies, firms, government departments, and individuals. It is mandatory to quote your TAN number in all TDS/TCS returns, challans for TDS/TCS payments, TDS/TCS certificates, and other documents.

If you are an individual or entity that needs to deduct or collect tax at source, you must obtain a TAN number. This is necessary for tax compliance mechanisms and for conducting day-to-day operations without any issues.

The TAN number is used for deductions like salary, dividends, or interest and must be quoted in returns, challans, payments, and certificates. Failure to do so can result in a penalty.

It is important to note that possessing or using more than one TAN is illegal. If you have multiple TANs, you should continue using the one you regularly use and surrender the others for cancellation.

To apply for a TAN number, you can either apply online or offline. The online method involves submitting an application through the TIN-NSDL website, while the offline process involves visiting a TIN facilitation centre and submitting the required form.

Who needs a PAN number?

A Permanent Account Number (PAN) is a 10-digit unique alphanumeric identification number issued by the Income Tax Department in India. It is issued to individuals and entities for the purpose of tracking their financial transactions. Here are the categories of people who need to obtain a PAN:

• Every person who is required to file an income tax return or is required to file a return on behalf of any other person.
• Every person whose total income or the total income of any other person they represent exceeds the maximum amount that is not chargeable to tax.
• A charitable trust that is required to furnish a return under Section 139(4A).
• Every person carrying on any business or profession whose total sales, turnover, or gross receipts exceed or are likely to exceed 500,000 rupees in any year.
• Every person who intends to enter into specified financial transactions in which quoting PAN is mandatory.
• Every non-individual resident and persons associated with them who enter into financial transactions exceeding 250,000 rupees during the financial year.

Additionally, PAN is mandatory for the following transactions:

• Sale or purchase of a motor vehicle or vehicle other than two-wheeled vehicles.
• Opening a bank account (other than certain types of time deposits and basic savings accounts).
• Applying for a credit or debit card.
• Opening a demat account with a depository, participant, custodian of securities, or any entity regulated by SEBI.
• Payment of more than 50,000 rupees in cash to a hotel or restaurant in a single bill.
• Payment of over 50,000 rupees in cash for travel to a foreign country or to purchase foreign currency at one time.
• Payment of more than 50,000 rupees to a mutual fund for the purchase of its units.
• Payment exceeding 50,000 rupees to a company or institution for acquiring debentures or bonds.
• Payment of above 50,000 rupees to the Reserve Bank of India for acquiring bonds.
• Cash deposits exceeding 50,000 rupees in a single day with a banking company or cooperative bank.
• Deposits of cash totalling more than 250,000 rupees during the period of 9th November 2016 to 30th December 2016 with a banking company, cooperative bank, or post office.
• A time deposit of over 50,000 rupees or aggregating to more than 500,000 rupees during a financial year with a banking company, cooperative bank, Nidhi, or non-banking financial company.
• Payment of 50,000 rupees or more in cash, bank draft, pay order, or banker's cheque in a financial year for one or more prepaid payment instruments.
• Payment of an amount aggregating to more than 50,000 rupees in a financial year as life insurance premiums.
• A contract for the sale or purchase of securities (excluding shares) for more than 100,000 rupees per transaction.
• Sale or purchase of shares of a company not listed on a recognised stock exchange for over 100,000 rupees per transaction.
• Sale or purchase of any immovable property for more than 1,000,000 rupees or valued by the stamp valuation authority at over 1,000,000 rupees.
• Sale or purchase of goods or services (other than those specified above) for an amount exceeding 200,000 rupees per transaction.

It is important to note that PAN is not just for Indian citizens. Foreign nationals, such as investors with a valid visa, can also obtain a PAN card.

What is TAN used for?

A TAN, or Tax Deduction and Collection Account Number, is a 10-digit alphanumeric identification number issued by the Income Tax Department of India. It is used for tracking tax-related transactions and serves as a proof of identity for businesses or organisations that are responsible for deducting or collecting taxes.

TAN is mandatory for anyone who is required to deduct or collect tax at source, such as employers, banks, and other financial institutions. It is used to track and monitor tax payments and compliance with Indian tax laws. The number consists of four alphabets, five numbers, and one alphabet. The first three alphabets represent the jurisdiction code, the fourth is the initial of the name of the holder (in the case of individuals or firms), and the last is a check digit. For example, PDES03028F is a valid TAN.

TAN is required for various tax-related transactions, including filing TDS/TCS returns, challans, and certificates. It is mandatory to mention the TAN number in every document related to TDS or TCS. Failure to quote TAN can result in the rejection of TDS payments and returns by banks.

Registration for TAN can be done both online and offline by filling and submitting form 49B. The process typically takes around 15-20 days.

What is PAN used for?

PAN, or Permanent Account Number, is a unique 10-digit alphanumeric identification number issued by the Income Tax Department of India to individuals and entities. It is used for income tax purposes and is mandatory for certain financial transactions, such as opening a bank account or purchasing property. The PAN card serves as proof of identity and contains information such as the holder's name, date of birth, and photograph.

PAN is required for various financial transactions, including:

• Opening bank accounts
• Filing tax returns
• Making investments
• Buying and selling high-value items such as property, cars, and jewelry
• Accessing financial services such as credit and debit cards, loans, and insurance

PAN is also used to link all of an individual's bank accounts, making it easier to track and manage their finances. It serves as a universal identification code for financial transactions and is one of the most important forms of identity for Indian citizens.

Additionally, PAN can be used to track an individual's financial transactions, which is useful for preventing tax evasion and money laundering. However, this may be a concern for individuals who value their financial privacy.

Disadvantages of PAN

While PAN is a widely accepted and important form of identification in India, there are some disadvantages to be aware of:

• PAN may not be accepted as proof of identification in some foreign countries, limiting its usefulness for international transactions.
• The PAN application process can be time-consuming and require multiple documents, making it challenging for some individuals to obtain.
• PAN can be lost, stolen, or misused, leading to financial fraud and identity theft.
• PAN is mandatory for many transactions, which some may view as an additional burden on citizens.
• PAN is not portable across states, causing issues for those who move frequently.
• PAN is not mandatory for transactions below a certain threshold, which may create opportunities for tax evasion.

How to get a TAN number?

How to Get a TAN Number

The Tax Deduction and Collection Account Number (TAN) is a 10-digit alphanumeric number issued by the Income Tax Department. It is required by all those who are responsible for deducting or collecting taxes.

To apply for a TAN number, you can follow the steps outlined below:

Online Application:

• Visit the official website of the Income Tax Department or the Protean-TIN website.
• Click on the ''Online Application for TAN (Form 49B)' option.
• Select the 'Apply for New TAN' option and choose the category of deductors.
• Fill out the application form, ensuring that all mandatory fields are completed.
• Review your application for any errors or inaccuracies.
• Confirm your application and proceed to the payment gateway.
• Pay the required fees online or via cheque, DD, or credit/debit card.
• An acknowledgement slip will be generated after successful payment. Save and print this slip.
• Send the acknowledgement slip along with other required documents to Protean eGov Technologies Ltd.

Offline Application:

• Visit your nearest TIN Facilitation Centre and obtain Form 49B. Alternatively, download the form from the Income Tax website.
• Fill out the form and submit it to the TIN counter, along with the processing fee. Payment can be made via cash, cheque, or DD.

Please note that the processing fee for both online and offline applications is currently ₹77, including Goods and Service Tax.

Once your application is processed, you can track the status of your TAN using the 14-digit unique Acknowledgment Number. You can also call the TIN Call Centre or send an SMS to receive updates on your application status.

Frequently asked questions