What is TAN and PAN in Income Tax? A Complete Guide

PAN (Permanent Account Number) is a 10-character alphanumeric identifier issued to every taxpayer — individual, company, firm, or trust — under Section 139A of the Income Tax Act, 1961. It is mandatory for filing income tax returns, conducting financial transactions above specified limits, and for any person whose total income exceeds the basic exemption limit. PAN is unique to the person and remains valid for life.

TAN (Tax Deduction and Collection Account Number) is a 10-character alphanumeric number issued under Section 203A of the Income Tax Act. It is required only for persons who are responsible for deducting or collecting tax at source (TDS/TCS). Every deductor must quote TAN in all TDS/TCS returns, challans, and certificates. Unlike PAN, TAN is not required for every taxpayer — only for those who deduct tax.

The core difference lies in purpose: PAN tracks your own tax liability, while TAN tracks the tax you deduct from others. A single entity may hold both numbers — for example, a company will have its own PAN and also a separate TAN for its TDS obligations.

PAN is mandatory for every person whose total income exceeds the basic exemption limit during a financial year. It is also required for any person carrying on business or profession whose turnover exceeds ₹5 lakh, or who is liable to pay GST. Practically, any individual who files an income tax return, opens a demat account, or makes high-value transactions (such as buying property worth ₹10 lakh or more) needs a PAN.

TAN is mandatory for every person who is required to deduct tax at source (TDS) or collect tax at source (TCS) under the Income Tax Act. This includes employers deducting TDS from salaries, businesses making payments to contractors, professionals making payments to subcontractors, and banks deducting TDS on interest payments. Even if you have a PAN, you must separately apply for TAN if you are a deductor.

A common scenario: A salaried individual needs only PAN. But if that same individual starts a business and hires employees, they will need both PAN (for their own tax) and TAN (for deducting TDS from employee salaries).

PAN application is made through Form 49A (for Indian citizens) or Form 49AA (for foreign entities). You can apply online through the NSDL or UTIITSL portals, or submit a physical form at a PAN service centre. The application requires proof of identity, address, and date of birth. The fee is approximately ₹93 (plus GST) for Indian communication address, and ₹864 (plus GST) for foreign address. Processing takes 15-20 working days.

TAN application is made through Form 49B. You can apply online through the TIN-NSDL portal or submit a physical form at a TIN facilitation centre. The fee is ₹65 (plus GST). Processing typically takes 7-10 working days. The application requires details of the deductor's name, address, and the type of deduction (TDS or TCS).

Both applications require a valid PAN of the applicant. For TAN, the PAN of the person responsible for deduction must be provided. After approval, the department issues a certificate containing the TAN or PAN number.

For PAN: If a person fails to apply for PAN when required, the Assessing Officer may impose a penalty of ₹10,000 under Section 272B of the Income Tax Act. Additionally, without PAN, you cannot file income tax returns, and TDS may be deducted at a higher rate (20% instead of the applicable rate).

For TAN: Failure to apply for TAN or failure to quote TAN in prescribed documents attracts a penalty of ₹10,000 under Section 272BB. More significantly, without TAN, you cannot deposit TDS or file TDS returns. The department may also treat the non-deduction as a default, leading to interest and further penalties under Section 201.

Both penalties are separate from the consequences of non-compliance with TDS provisions. For example, if you deduct TDS but do not have TAN, you face the ₹10,000 penalty plus potential interest for delayed deposit.

Yes, a single person can and often does hold both numbers. For instance, a sole proprietor who has employees will need PAN for their own tax filings and TAN for deducting TDS from employee salaries. Similarly, a company will have one PAN for its corporate tax and one TAN for its TDS obligations.

However, note that TAN is entity-specific, not person-specific. If you have multiple businesses, each business that deducts TDS may need its own TAN. For example, a group of companies under common ownership will each require a separate TAN if they independently deduct TDS.

There is no prohibition on holding multiple TANs, but each TAN must be used only for the entity it was issued to. Using one TAN for multiple deductors is not permitted.

If you are starting a business, hiring employees, or making payments that require TDS deduction, apply for both PAN and TAN before your first tax deduction. For specific guidance on which number you need and how to apply, consult a qualified chartered accountant or tax professional.

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This page provides preliminary information. It is not legal advice. For your matter, consult a qualified professional.