Individual taxpayers and corporations in India require various documents while filing income tax returns (ITRs). While the process itself can seem daunting, the various terms associated with the process can further complicate matters, especially for those filing income tax returns for the first time. The two most common terms that come up either while filing taxes or while communicating with the Tax Department are TAN and TIN.
In this blog, let us understand why individuals think tan number and tin number are the same and their differences.
Key Takeaways
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The Tax Deduction and Collection Account Number (TAN) is a unique ten-digit alphanumeric code assigned by the Income Tax Department to all entities that are responsible for collecting or deducting taxes. Furthermore, under section 203A of the Income Tax Act, 1961, in order to furnish the TDS details collected by the entity, such as corporations and offices that deduct taxes, a TAN is mandatory. Section 203A has also made it mandatory to quote TAN for documents, including TDS and TCS statements, TDS and TCS certificates, and challans for payment of TDS and TCS, among others.
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The Taxpayer Identification Number (TIN), similar to TAN, is a unique 11-digit identification number that is given to Indian enterprises and organisations for which Value Added Tax (VAT) is applicable, such as e-commerce stores and product or service manufacturers. Quoting of TIN has been made mandatory for business enterprises while filing taxes, and applies to sales transactions that happen within a state, and those that happen between two or more states. The Taxpayer Identification Number (TIN) also makes it easier for entities to have all the VAT transactions in one centralised place. This also enables entities to see the amount of VAT collected, paid, or to be paid in the future.
Both TAN and TIN are tax identification numbers. However, while the Taxpayer Identification Number (TIN) is beneficial for both the state and the entity, the Tax Deduction and Collection Account Number (TAN) is assigned to companies and financial institutions. TAN helps in keeping track of the collection and deduction of taxes that take place at the source.
Apart from that, here are some of the key differences between TAN and TIN:
Applying for a TAN (Tax Deduction and Collection Account Number) and a TIN (Taxpayer Identification Number) is essential for businesses and individuals involved in tax-related transactions. Here’s a step-by-step guide for each:
Both TAN and TIN have specific formats that help in identification and classification. Understanding these formats ensures smooth tax compliance and correct usage in financial documentation. Here’s a quick overview of the structure of the TAN and TIN numbers:
TAN must be quoted in all TDS/TCS transactions, but individuals making personal payments (like rent) don’t need a TAN to deduct TDS.
Source: Clear Tax
Several government bodies oversee the issuance, compliance, and regulation of TAN and TIN in India. Each authority plays a specific role in ensuring smooth tax administration and compliance.
Understanding the distinction between TAN and TIN is essential for businesses and individuals to understand India’s tax system. The Taxpayer Identification Number (TIN) is for entities such as traders and manufacturers, for which Value Added Tax (VAT) is applicable. For these business enterprises and companies, quoting a TIN is mandatory while filing taxes.
The Tax Deduction and Collection Account Number (TAN) is assigned to all the entities that are responsible for deducting or collecting taxes at the source. For example, companies that deduct TDS from employees’ salaries, or financial institutions that collect taxes on certain payments, are required to have a TAN before remitting these taxes to the government. TDS is usually applicable to salaries, commissions, and interests. When it comes to life insurance policies, TDS is usually deducted from the maturity amount.
TAN refers to the Tax Deduction and Collection Number in India.
A Taxpayer Identification Number (TIN) is a unique number used by the IRS to manage and enforce tax laws. It is issued either by the Social Security Administration or the IRS.
When we discuss what TAN and TIN are or TAN vs TIN, we must understand that they are essential and mandatory legal documents when you indulge in tax-related activities. TAN helps entities that may deduct or collect at source. TIN (Taxpayer Identification Number), on the other hand, was primarily used for tracking indirect tax payments such as VAT. With the introduction of GST, TIN has largely been replaced by the GST Identification Number (GSTIN)
The Taxpayer Identification Number (TIN) has mostly been replaced by the 15-digit Goods and Services Tax Identification Number (GSTIN) for business and transactional purposes after the rollout of GST in July 2017. However, TIN has not been completely phased out and continues to be used in certain limited situations.
TAN is a 10-character alphanumeric code, while TIN is an 11-digit numeric code. TAN identifies tax deductors, while TIN identifies VAT taxpayers.
The consequences of missing or incorrectly quoting TAN/TIN in tax filings are as follows:
Penalties: Tax authorities may impose monetary penalties, such as a fine of ₹10,000 for quoting an incorrect TAN while filing a challan.
Invalid Invoices: E-invoices with errors or missing details are treated as invalid and may result in invoice generation failure and incur penalties.
Reputational Impact: Incorrect tax invoices can damage a business’s credibility and strain relationships with customers and business partners.
Legal Action: Providing false PAN details may result in prosecution, including imprisonment of up to seven years, along with a monetary penalty.
TAN can be applied both online and offline using Form 49B through authorised portals.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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