PAN and TAN are the two foundational identifiers in India’s income tax system. Every taxpayer needs a PAN; every person deducting or collecting tax needs a TAN (now formally called TDCA-Tax Deduction and Collection Account Number). The Income Tax Act, 2025, which takes effect on 1 April 2026, carries forward these concepts under Section 262 (PAN) and Section 397 (TDCA), with the Draft Income Tax Rules, 2026 prescribing updated forms, procedures, Aadhaar integration, and quoting requirements.
This guide covers both PAN and TAN/TDCA under the new framework-the application process, the new form numbers, the Aadhaar linkage mandate, inoperative PAN consequences, PAN quoting thresholds, TAN exemptions, and penalties. For businesses managing income tax return filing (https://www.patronaccounting.com/income-tax-return) and TDS compliance, understanding these rules is critical from Day 1 of the new Act.
Key Terms You Should Know
- Section 262: The PAN provision under IT Act, 2025. Covers allotment, quoting requirements, Aadhaar linkage, and inoperative PAN. Replaces Sections 139A and 139AA of the 1961 Act.
- Section 397: The TDCA/TAN provision under IT Act, 2025. Covers allotment, quoting requirements, and exemptions from obtaining TAN. Replaces Section 203A of the 1961 Act.
- Rule 158: Prescribes PAN application procedure-Forms 93-96, Aadhaar integration, timelines, and jurisdictional filing. Replaces old Rule 114.
- Rule 162: Prescribes consequences when PAN becomes inoperative due to non-linkage with Aadhaar.
- Rule 216: Prescribes TDCA/TAN application procedure-Form 134 (government) and Form 135 (non-government). Replaces old rules for Form 49B.
- TDCA Number: Tax Deduction and Collection Account Number-the formal name for TAN under the 2025 Act. Same 10-digit alphanumeric structure (e.g., BLRR12345C). Existing TANs continue under the new Act.
- Inoperative PAN: A PAN that has been rendered non-functional because the holder failed to link it with Aadhaar by the prescribed deadline. Can be reactivated by linking Aadhaar and paying Rs 1,000 fee.
PAN Under Section 262: What Has Changed
The Permanent Account Number framework under Section 262 of the IT Act, 2025 consolidates the earlier Sections 139A and 139AA into a single provision. The core concept is unchanged-PAN is a unique 10-digit alphanumeric identifier for every taxpayer-but the procedural framework has been updated:
New Application Forms:
| Form | Applicant Category | Old Equivalent | Rule |
|---|---|---|---|
| Form 93 | Indian citizens (individuals) | Form 49A | Rule 158(1) |
| Form 94 | Foreign citizens / entities | Form 49AA | Rule 158(1) |
| Form 95 | HUFs, firms, companies, trusts, AOPs, BOIs, local authorities, artificial juridical persons | Part of Form 49A | Rule 158(1) |
| Form 96 | Government entities | N/A (new category) | Rule 158(1) |
Applications can also be made through a common application form notified by the Central Government-this covers one-stop registrations where PAN is obtained alongside GST registration, Udyam registration, or company registration (https://www.patronaccounting.com/private-limited-company-registration).
Aadhaar Integration: Under Rule 158(3), a person possessing Aadhaar but not PAN can apply by simply intimating their Aadhaar number. The DG (Systems) authenticates the Aadhaar, and PAN is allotted based on the authenticated data. This replaces the earlier Section 139AA instant-PAN facility with a rule-backed framework.
PAN Allotment Timelines: Rule 158(7) prescribes specific deadlines linked to: income thresholds, business turnover exceeding Rs 5,00,000, financial transactions above Rs 2,50,000, return filing obligations, and specified transactions under Section 262. The application must be made to the AO having jurisdiction, or to an officer specifically assigned the PAN allotment function by the DG (Systems).
Inoperative PAN: Consequences Under Rule 162
If your PAN is not linked to Aadhaar as required under Section 262(6), the PAN becomes inoperative. Under Rule 162 of the 2026 Rules, the consequences are:
- No refund: Tax refunds (including interest) will not be processed while PAN is inoperative.
- No interest on refunds: Interest that would otherwise be payable on the refund amount is blocked for the inoperative period.
- Higher TDS/TCS: Tax deducted or collected at source will be at the higher rate prescribed under Section 397(2)-typically double the normal rate or 5%, whichever is higher.
- Unable to use PAN: The inoperative PAN cannot be quoted in financial transactions, ITR filing, or any document where PAN is required. Effectively, the taxpayer is locked out of the tax system.
How to reactivate: Pay a fee of Rs 1,000 (under Rule 158(10)), intimate your Aadhaar number, and the PAN becomes operative within 30 days from the date of intimation. For entities requiring tax audit services (https://www.patronaccounting.com/tax-audit), an inoperative PAN for any key person (director, partner, trustee) can disrupt the entire compliance calendar.
Revised PAN Quoting Requirements Under the 2026 Rules
The Draft Income Tax Rules, 2026 revise the PAN quoting thresholds for specified financial transactions. PAN must be quoted in transactions involving:
| Transaction | Revised Threshold (2026 Rules) |
|---|---|
| Sale or purchase of immovable property | Stamp duty value or consideration exceeds Rs 30 lakh (revised upward) |
| Sale or purchase of motor vehicle (other than two-wheelers) | All transactions (no threshold-PAN always required) |
| Cash deposit with banking company / co-operative bank | Aggregate exceeds Rs 50,000 in a day |
| Opening bank account (other than basic savings) | All openings (no threshold) |
| Time deposit with banking company / post office / co-operative / Nidhi company | Exceeds Rs 50,000 or aggregate exceeds Rs 5 lakh in a FY |
| Payment for life insurance premium | Aggregate exceeds Rs 50,000 in a FY |
| Sale or purchase of securities (including mutual fund units) | Exceeds Rs 1 lakh per transaction |
| Payment to hotels and restaurants | Single bill exceeds Rs 50,000 |
| Foreign travel | Cash payment exceeds Rs 50,000 |
| Payment of electricity | Aggregate exceeds Rs 1 lakh in a FY |
These thresholds are important for both taxpayers (who must quote PAN) and entities accepting payments (who must collect PAN details). For businesses using professional accounting services (https://www.patronaccounting.com/accounting-services), configuring billing systems to capture PAN at the revised thresholds is essential from 1 April 2026.
TAN (TDCA) Under Section 397: Application and Exemptions
The Tax Deduction and Collection Account Number (TDCA)-the formal name under the 2025 Act for what was previously called TAN-is governed by Section 397. Every person responsible for deducting or collecting tax at source must obtain a TDCA before making the deduction or collection.
New Application Forms:
| Form | Applicant Category | Old Equivalent |
|---|---|---|
| Form 134 | Government deductors/collectors | Form 49B (government version) |
| Form 135 | Non-government deductors/collectors (companies, firms, individuals, trusts) | Form 49B (non-government version) |
Under Rule 216, the application must be made before tax is deducted or collected, or within 30 days from the end of the month in which tax was first deducted or collected. The application is submitted to the designated officer specified by the DG (Systems), with proof of identity, address, and incorporation details.
TAN Exemptions (Section 397(1)(c)):
- Individuals/HUFs deducting TDS on rent (old Section 194-IB) - no TAN required; PAN used instead
- Individuals/HUFs deducting TDS on payments to contractors/professionals under specified thresholds (old Section 194M) - no TAN required
- Budget 2026 expansion: Resident individuals and HUFs deducting TDS on purchase of immovable property from a non-resident - no TAN required from 1 October 2026. The buyer can use PAN and file the challan-cum-statement directly.
One TDCA can be used for all types of deductions and collections-it is not necessary to apply for separate TDCAs for salary TDS, rent TDS, professional TDS, etc. However, different branches of an entity cannot share a single TDCA-each branch must have its own.
PAN vs TDCA (TAN): Side-by-Side Comparison
| Aspect | PAN | TDCA (TAN) |
|---|---|---|
| Full Name | Permanent Account Number | Tax Deduction and Collection Account Number |
| Governing Section | Section 262 of IT Act, 2025 | Section 397(1)(a) of IT Act, 2025 |
| Governing Rule | Rule 158 (application), Rule 162 (inoperative) | Rule 216 (application), Rule 217 (NR exemptions) |
| Application Forms | Forms 93, 94, 95, 96 | Forms 134, 135 |
| Who Needs It | Every taxpayer (individual, company, trust, firm, etc.) | Every person deducting or collecting tax at source |
| Structure | 10-digit alphanumeric (e.g., ABCDE1234F) | 10-digit alphanumeric (e.g., BLRR12345C) |
| Aadhaar Linkage | Mandatory (Section 262(6)). Non-linkage makes PAN inoperative. | Not applicable-no Aadhaar linkage requirement for TAN |
| Penalty for Non-Compliance | Rs 10,000 for failure to obtain or quoting incorrect PAN (Section 468) | Rs 10,000 for failure to obtain or quoting incorrect TAN (Section 468) |
| Can One Replace the Other? | No. PAN cannot be quoted where TAN is required (except in exempted cases) | No. TAN cannot be quoted where PAN is required |
Common Mistakes to Avoid
Mistake 1: Not linking Aadhaar with PAN. If Aadhaar is not linked, PAN becomes inoperative under Rule 162. No refunds, higher TDS, and inability to use PAN for any financial transaction. The reactivation fee is Rs 1,000, and PAN takes 30 days to become operative again. Ensure linkage immediately.
Mistake 2: Quoting PAN where TAN is required (and vice versa). TDS/TCS challans, returns (Form 24Q, 26Q, 27Q, 27EQ), and certificates (Form 16, 16A) require TAN. ITR and financial transactions require PAN. Quoting one in place of the other attracts a penalty of Rs 10,000. For entities using company registration (https://www.patronaccounting.com/private-limited-company-registration) with multiple TDS obligations, ensure both PAN and TAN are correctly used in all filings.
Mistake 3: Not applying for TAN before the first deduction. Under Rule 216, the application must be made before the first deduction/collection, or within 30 days from the month-end of the first deduction. Missing this attracts a penalty of Rs 10,000 under Section 468.
Mistake 4: Holding multiple TANs. It is illegal to hold more than one TAN for the same deduction/collection responsibility (except for separate branches). If duplicate TANs were allotted, apply for cancellation of the extra TAN. Using multiple TANs creates reconciliation issues with Form 26AS and AIS.
Mistake 5: Not updating PAN quoting in transactions above revised thresholds. The 2026 Rules revise several PAN quoting thresholds (e.g., property at Rs 30 lakh, electricity at Rs 1 lakh). Businesses that accept payments without collecting PAN above these thresholds face reporting failures in SFT (Statement of Financial Transactions).
Key Takeaways
Section 262 (PAN) and Section 397 (TDCA/TAN) of the Income Tax Act, 2025 carry forward India’s established taxpayer identification framework with updated procedures, consolidated provisions, and enhanced Aadhaar integration. PAN applications are now through Forms 93-96 under Rule 158; TAN applications through Forms 134-135 under Rule 216.
The most critical compliance requirement is Aadhaar-PAN linkage-failure makes PAN inoperative under Rule 162, blocking refunds, increasing TDS rates, and effectively locking the taxpayer out of the system. Reactivation requires Rs 1,000 fee and 30-day processing.
Budget 2026 eases TAN compliance by exempting resident individuals and HUFs from obtaining TAN for NR property purchases (from 1 October 2026). PAN quoting thresholds are revised for several transaction categories, requiring businesses to update their collection and reporting systems.
PAN and TAN serve different purposes and are not interchangeable. Quoting one in place of the other attracts a Rs 10,000 penalty. Every entity must ensure both identifiers are correctly obtained, maintained, and quoted across all tax filings and financial transactions.
Need Help with PAN, TAN, or TDS Compliance?
Whether you need a new PAN or TAN application, Aadhaar-PAN linkage assistance, resolution of inoperative PAN, or TDS/TCS compliance setup under the new Act, professional guidance ensures you are correctly identified in the tax system from the start.
Explore our income tax compliance services (https://www.patronaccounting.com/income-tax-return) for PAN/TAN application support, Aadhaar linkage, TDS return filing, and complete tax compliance under the Income Tax Act, 2025.
For queries, reach out at +91 945 945 6700 or WhatsApp us directly.
