Employer identification number meaning:
It is a unique 10-character alphanumeric (in India) assigned to business entity for purpose of reporting taxes and easy identification by the Income Tax Department in India.
In India, it is termed as PAN or Permanent Account Number not TIN or Taxpayer Identification Number (as some of you might get confused!)
Let’s understand in detail about employer identification number -
When it comes to tax compliance by employers, employer identification numbers play a significant role. This unique number helps the Revenue department to streamline the process of tax collection and ensure statutory compliance by employers.
Let’s have a detailed explanation of EIN so that you as an employee will never fail to be compliant with standards and regulations.
Employer Identification Number Definition
An Employer Identification Number, known as EIN, is issued by the Income Tax Department to both businesses and non-profit organisations for taxation purposes.
This unique number is utilised for various purposes like- tax filing by organisations, opening bank accounts for professional purposes and other financial transactions involved to comply with rules and regulations.
Employer Identification Number Example
Employer Identification Number is in the format-ABCTY1234D where first three characters represent series range from AAA-ZZZ.
4TH character I.e. represents the status of PAN holder (T=Trust, F=Firm, H=HUF, P=Individual, C= Company)
5th character represents I.e. Y represents the first alphabet of the last name of PAN holder.
Next 4 digits range between 0001 and 999.
Last or 10th character ranges from A to Z.
Why is an EIN important for Businesses and other entities?
Let’s explore the reasons why it is important for businesses to obtain EIN-
Statutory Compliance
A business entity needs to comply with government’s rules and regulations to be authentic and legal in Indian business landscape.
For completing various tax documents and obligations like TDS returns, employment tax returns, employers need their EIN.
Corporate Bank Account
For business transactions like salaries to employees, purchase of laptops and other assets, payment to vendors and more, it is recommended to employers to open a dedicated bank account.
Thus, for opening these kind of bank accounts, it is mandated by revenue department to mention EIN in their forms to maintain utmost transparency.
Employees’ Recruitment
When new candidates are hired by business entities, employers have to report employment taxes and related documentation to the revenue department.
For recruitment management and streamlined payroll compliances, employers must have EIN.
Identity Fraud
EIN is one of the powerful tools for employers to establish their legal identity and protect themselves from forgery or identity fraud.
If an employer does not have registered EIN, there are chances of losing corporate money, duplication of brand identity, stealing important documents and more. Thereby, it is recommended for business identities- be it startup or MSMEs to get their unique EIN
Established Entity
To establish your business entity as the trusted organisation for potential candidates to join your workforce, vendors working for you and prospects or customers associated with you, EIN can create a meaningful impact.
Who is Required to obtain an EIN from the IRS?
The IRS department in USA and Income Tax department in India has mandated certain entities to file and get EIN/PAN for as the part legal compliances.
Business entities that require EIN must have either of specifications-
- Registered companies incorporated under Company Act,2013
- Partnership firm including Limited Liability Partnerships (LLPs)
- Sole proprietors where an individual operates a business without a separate legal entity
- Hindu Undivided Family (HUF) engaged in economic activity and have taxable income
- Trusts (whether charitable or non-charitable)
- Association of Persons and Body of Individuals required to deduct TDS
- Foreign companies doing business in India, either through a branch or as a separate entity
How can an Organization apply for an EIN?
Obtaining an EIN is not a tedious process as the government wants every business entity to comply with ease and ensure their unique identity for financial transactions.
You can apply for EIN (PAN in India) either of the official website- NSDL and UTIITSL.
How to apply for EIN/PAN on the NSDL Website?
Here is the step-by-step process:
Step 1-Login to NSDL website’s Online PAN Application section
Step 2-Choose your application type: Form 49A (Indian Citizens) or 49AA (Foreign Citizens)
Step 3-Choose your category from-Individual, Association of Persons, Body of Individuals, Trust, Limited Liability Partnerships, Firm, Government, Hindu Undivided Family, Artificial Judicial Person, and Local Authority.
Step 4– Complete the information- Title, Last name/surname, First name, Middle Name, Date of Birth/Incorporation/Formation in DD/MM/YYYY format, email ID, mobile number, and Captcha code.
Submit the form.
Step 5- You will receive an acknowledgement with a token number on the next page.
Click on ‘Continue with PAN Application Form’.
Step 6- Now, fill in additional personal details similar to Form 49A or Form 49AA.
Step 7- Select the mode to submit the documents.
You can:
a) Forward application documents physically;
b) Submit digitally through digital signature;
c) Submit digitally through e-sign.
Step 8- Specify documents you are submitting as proof of identity, address, and date of birth.
Confirm the declaration, place and date of application.
Review and submit the form to ensure there are no errors.
Step 9- Click on ‘Proceed’ for payment options.
Choose either Demand Draft or Online Payment through Bill Desk.
Step 10- When you select Demand Draft, you have to make sure that you have DD before starting the application process.
When you choose Bill Desk, you can pay through Net Banking, and Debit or Credit Cards.
Step 11-Click on ‘I agree to terms of service’ and proceed to pay.
Step 12- If you pay by using your credit card or debit card or via net banking, you will receive an acknowledgement receipt and payment receipt.
Print the acknowledgement receipt.
Step 13-Attach two recent photographs along with the acknowledgement receipt and send the supporting documents via post or courier to Protean e-Gov Technologies Limited.
Once your documents are received, Protean e-Gov Technologies Limited will process your application.
So, if you are the one who has newly started their business or want to renew your EIN/PAN, we recommend you start the process now.
Stay compliant always!