PAN vs TAN in India: Applicability, Forms, and Compliance for Foreign Companies

A practical guide to PAN and TAN for foreign companies and investors in India—covering applicability, forms, compliance sequencing, and common pitfalls.

In India, PAN is the foundation of a company’s tax identity, while TAN becomes essential once there are payroll or vendor payments subject to withholding tax. Foreign companies often underestimate how early these registrations are needed, particularly when cross-border payments or local hiring are involved.

PAN (Permanent Account Number)

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PAN is India’s primary tax identification number for entities and individuals.
It is mandatory for:

• Incorporating a company or LLP
• Opening a bank account
• Filing income tax returns
• Entering most financial transactions (investments, contracts, GST registration, etc.)

Legal basis:
Income Tax Act, 1961 – Section 139A
(Central Board of Direct Taxes – CBDT)

TAN (Tax Deduction and Collection Account Number)

TAN is required only if the entity will deduct or collect tax at source, such as:

• Salary payments
• Professional/consulting fees
• Rent
• Contractor payments
• Certain cross-border payments

Legal basis:
Income Tax Act, 1961 – Section 203A

PAN applicability

TAN applicability

You need TAN if you:

• Employ staff in India
• Pay vendors where TDS applies
• Make taxable cross-border payments
• Collect TCS on specified transactions

You do NOT need TAN if:

• You have no TDS/TCS obligations
• You are only investing passively without taxable payments

Non-resident investors and foreign companies are required to obtain PAN even without a physical presence in India. The process is straightforward with apostilled documents, but early planning is critical to avoid delays in banking, compliance, and transaction execution.

Forms for PAN application

1. Form 49A – For Indian entities

Used by:

• Indian companies
• LLPs
• Firms
• Indian residents

2. Form 49AA – For foreign applicants

Used by:

• Foreign companies
• Non-resident individuals
• Overseas investors
• Foreign promoters/shareholders

Typical documents required for foreign applicants:

• Certificate of Incorporation (apostilled/notarized)
• Registered address proof
• Authorized signatory ID
• Tax identification from home country (if applicable)

Forms for TAN application

Form 49B – For all entities (Indian + foreign)

Used by:

• Companies
• LLPs
• Branch offices
• Foreign companies with TDS obligations

Special rules for foreign companies & non-residents – PAN

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Foreign entities must obtain PAN if they:

• Invest in Indian companies
• Earn income from India
• Open bank accounts
• File tax returns
• Enter certain financial contracts

No physical presence is required – PAN can be obtained remotely using apostilled documents.

TAN is required only if the foreign entity:

• Makes payments subject to Indian TDS
• Employs staff in India
• Has a PE (Permanent Establishment)
• Runs a branch/project office

Practical compliance sequence

For most companies:

1. Incorporate (via MCA)
2. Obtain PAN
3. Assess TDS exposure
4. Apply for TAN (if needed)
5. Register for GST (if applicable)

Common compliance mistakes to avoid

• Assuming foreign investors don’t need PAN
• Delaying TAN until payroll starts
• Using personal PAN for company transactions
• Not aligning TDS obligations with banking setup

Delays or errors in PAN and TAN registration can disrupt payroll, vendor payments, and statutory filings. Treating these as foundational compliance steps, rather than administrative formalities, helps companies avoid downstream regulatory risk.

Quick summary

For business inquiries and support with PAN/TAN and company setup, hiring, and operation compliance services in India, please contact our experts at: india@dezshira.com

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