Tax is a charge that is imposed on everyone in every country. Tax is a financial charge that is imposed and to be paid compulsorily by every taxpayer in a country.
Tax is imposed by the government on anyone, be it a citizen or an organization. Tax acts as a medium through which the expenditures for the public and the spending of government can be funded and met.
That is, taxes help the government in providing us with the necessary goods and services such as bridges, parks, education, national defence, roads, etc. The government can also influence the taxes to ensure the stability of that country’s market. That is, tax plays a huge role in ensuring economic stability.
Each tax has a certain tax number associated with it, be it Income tax, GST, Land tax, Building tax, Professional tax, Water tax, etc. Two such numbers that are often confused for each other and sometimes even for unrelated things are TIN and TAN.
TIN vs TAN
The main difference between TIN and TAN is their purpose. TIN is used to track payments relating to any company or individual paying VAT. TAN is used to track Tax Deductions and Tax Collections from and at source, respectively.
Comparison Table Between TIN and TAN
| Parameter of Comparison | TIN | TAN |
| Acronym | TIN is the acronym for Taxpayer Identification Number. | TAN is the acronym for Tax Deduction and Collection Account Number. |
| Number composition | Taxpayer Identification Number consists of an 11-digit code which are all numbers. | Tax Deduction and Collection Account Number consists of a 10-digit alphanumeric code. |
| Purpose | The purpose of TIN is to track payments relating to any company or individual paying VAT. | The purpose of TAN is to track Tax Deductions and Tax Collections at and from source, respectively. |
| Eligible entities | Anyone who pays the Value Added Tax or VAT is eligible and has to register for TIN. | Anyone who deducts or collects tax at and from source, respectively, is eligible and has to register for TAN. |
| Allocating agency | TIN is allocated to an entity by the Commercial Tax Department of the state of the payer. | TAN is allocated to an entity by the Income Tax Department of India. |
What is TIN?
There are several taxes for different provisions such as land, water, building, income, good and services and many more. Each tax has a particular number associated with it. TIN and TAN are two such numbers. Each number is quite important for availing the provisions.
TIN is the acronym for Taxpayer Identification Number. As the name suggests, it acts as an identifying code for a taxpayer. However, the purpose of this number is to track the transactions of any entity that pays the VAT.
VAT is the acronym for Value Added Tax. It is a tax paid by anyone who extends and adds value to any kind of product or service, such as sellers, traders, e-commerce stores, or any other individual or store.
Any entity who pays the Value Added Tax must have the TIN number. Anyone who pays the VAT has to register for the TIN. TIN helps to pay entities in a lot of ways. With the help of the Taxpayer Identification Number (TIN), all VAT payments acquire a common, centralized place.
TIN acts as a record of all the VAT that is paid, collected or has to be paid by the entity. Thus, TIN helps in keeping a record of VAT transactions. The Taxpayer Identification Number is an 11-digit code that consists of all numbers. The first two digits denote the state from which TIN was issued.
TIN is allocated by the Commercial Tax Department of the state of the entity. In United States of America, TIN is issued by the Internal Revenue Service (IRS) or the Social Security Agency.
What is TAN?
TAN is the acronym for Tax Deduction and Collection Account Number. As the name suggests, it is associated with tax deductions and collections. The purpose of this number is to track the tax deductions and tax collections at and from the source, respectively.
TAN helps in keeping track of the tax deducted at the source, which is called TDS, and the tax collected from source, which is called TCS. TAN also helps in keeping a record. TAN acts as a reference point in the documents of the company.
And this is why, TAN is one number required by banks, companies, etc. For example, a company that pays salary to its employees require TAN since the net amount received by the employees is only after the tax has been deducted.
Any entity who deducts tax at source (TDS) or collects tax from source (TCS) is eligible and has to register for acquiring TAN. Anyone who deducts or collects tax at source must have a TAN number. Tax Deduction and Collection Account Number is a 10-digit code that is alphanumeric, that is, it consists of both letters and numeric digits.
The first four letters of the code denote the state in which TAN number was issued and also the initials of the entity. The last digit is also letter. The numeric digits in the middle are random numbers.
TAN is allocated by the Income Tax Department of India.
Main Differences Between TIN and TAN
- The main difference between TIN and TAN is their purpose. TIN is used to track the transactions of entities who pay VAT, also called Value Added Tax. But TAN is used to track the tax deductions and tax collection at source.
- TIN stands for Taxpayer Identification Number. But TAN stands for Tax Deduction and Collection Account Number.
- Anyone who pays Value Added Tax or VAT is eligible and has to register for TIN. But anyone who deducts and collects tax at source is eligible and has to register for TAN.
- While TIN is a 11-digit code, which consist of all numbers, TAN is a 10-digit code, which consists of both letters and numeric digits.
- TIN is assigned or allocated by the Commercial Tax Department of the state of the entity. But TAN is assigned or allocated by the Income Tax Department of India.
Conclusion
Both TIN and TAN are numbers associated with taxes. Both are assigned by Tax departments.
However, the differences lie in purposes for which each are used for. Although both are used to track, the former tracks transactions of VAT payers whereas the latter tracks tax deductions and collections at source (TDS and TCS).
Irrespective of their differences, TIN and TAN help taxpayers to keep a record and function efficiently.
References
- https://www.ilomata.org/index.php/ijtc/article/view/44
- http://www.indianjournals.com/ijor.aspx?target=ijor:ijemr&volume=7&issue=5&article=017