Employer Identification Number - Definition and Significance | HRMantra HR Software

Employer Identification Number - Definition of Employer Identification Number and Its Significance

 6-8 minutes

A unique 10-character alphanumeric identifier for an organization that is given by the Income Tax Department under the Department of Revenue, Ministry of Finance, during tax registration.

In India, it is called PAN or Permanent Account Number, not TIN or Taxpayer Identification Number (as most of you might get confused!).

Now, proceeding to the tax compliance by employers, employer identification numbers assume significance. This unique number helps the Revenue department make the tax collection process easy and quick, and it is a means to ensure statutory compliance by employers.

I will give you quite a detailed explanation of EIN so that you, as an employee, will never have reason to fall short of standards and regulations.

Definition of Employer Identification Number

An Employer Identification Number, commonly known as EIN, is issued by the Income Tax Department to both businesses and non-profit organizations for taxation purposes.

This particular number is used for several reasons, including tax filing by the organization, opening of bank accounts for professional purposes, and the other financial transaction involved to comply with rules and regulations.

Example of the Employer Identification Number

The format of the Employer Identification Number is- ABCTY1234D

• First three characters represent the series range of AAA to ZZZ
• 4th character represents the status of PAN holder (T for Trust, F for Firm, H for HUF, P for Individual, C for Company)
• 5th character (Y) represents the first alphabet of the surname of the PAN holder
• Next 4 figures are between 0001 to 9999
• Last or 10th figure is between A to Z

Why EIN is Required for Businesses and Other Forms?

Discuss the following need for businesses and other forms to apply for EIN:

Statutory Compliances

A business entity needs to adhere to the government''s rules and regulations so that it gets established as an authentic and legal business in the Indian business landscape.

Employers need their EIN for completing various tax documents and obligations such as TDS returns and employment tax returns.

Corporate Bank Account

If I were an employer, I would advise opening a bank account dedicated to business transactions, such as paying salaries to employees, purchasing laptops and other assets, paying vendors, and more. This type of bank account requires the mention of EIN on the forms by the department of revenue in an effort to promote transparency in opening a bank account.

Recruitment of Employees

When the business employs a new candidate, employers need to report to the revenue department about the employment taxes and its related documentation.

All business entities need to have EIN for recruitment management and to maintain smooth payroll compliances.

One of the most powerful tools that employers can use to ensure that their identity is authenticated and protected from any kind of forgery or identity fraud is the EIN.

The chances include losing corporate money, duplication of brand identity, or stealing important documents. Thereby, it is recommended for business identities, be it startup or MSMEs, to get their unique EIN.

EIN can make a telling difference and make your business entity the trusted organization to which potential candidates may join in your workforce, vendors work for you, and prospects or customers associate with.

Who is Required to Get an EIN from the IRS?

The IRS department in the USA has mandated certain entities to file and get EIN as part of legal compliances.

Business entities that require EIN must have either of the following specifications:

• It is mandatory for Registered companies incorporated under Company Act, 2013
• Mandated for Partnership firms including Limited Liability Partnerships (LLPs) in case of partnership firms
• It is mandated for Sole proprietors where an individual operates a business without a separate legal entity
• Hindu Undivided Family (HUF) doing any economic activity and having taxable income
• Trusts, whether charitable or otherwise
• Association of Persons and Body of Individuals liable to deduct TDS
• Foreign Companies having business in India either having a branch or otherwise as a separate entity

How Can an Organization Apply for an EIN?

Receiving an EIN isn''t a cumbersome job because the government wants each and every business entity to become compliant easily, and its unique identity for financial transactions has to be ascertained by all means.

You can apply for EIN (PAN in India) with the help of either the NSDL or UTIITSL official website.

How to Apply for EIN/PAN on the NSDL Website?

Here is the step-by-step process:

1. Log on to NSDL''s website under the head, Online PAN Application section.
2. Select the type of application Form 49A for Indian Citizens; Form 49AA for Foreign Citizens.
3. Select your application category: Individual, Association of Persons, Body of Individuals, Trust, Limited Liability Partnerships, Firm, Government, Hindu Undivided Family, Artificial Judicial Person, and Local Authority.
4. Fill in the details- 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.
5. You will be redirected to the next page where you have an acknowledgement with a token number. Click on ''Continue with PAN Application Form''.
6. Now, fill in other personal details as it is in the Form 49A or Form 49AA.
7. Now select the mode you want to submit the documents. You can:
   • a) Send the application documents physically;
   • b) E-submission via E-signature;
   • c) E-submission via E-sign.
8. State the documents you have attached to prove your identity, address, and date of birth. Make the statement, place and date of applying. Final check and submit form for upload.
9. Select ''Next'' regarding payment. Payment can be made through Demand Draft/Online payment by clicking Bill Desk.
10. Once you click on Demand Draft, make sure you have the DD in your hand beforehand to initiate the process of applying. While choosing Bill Desk, pay by using Net Banking, and Debit or Credit Cards.
11. Click ''I agree to terms of service'' and proceed to make the payment.
12. Once payment is made either by your credit card or debit card or through net banking, you will receive the acknowledgement receipt with the payment receipt. Take a printout of the acknowledgement receipt.
13. Make sure to sign the acknowledgement card and attach two recent photographs with the acknowledgment card and send the supporting documents through post or courier to Protean e-Gov Technologies Limited.

The application will be processed once your documents are received by Protean e-Gov Technologies Limited.

Hence, all those who have recently started their business or want a renewal of their EIN/PAN, we advise you to apply now. Stay compliant always!

Popular Terms