Blog

Tax Deduction and Collection Account Number (TAN) is a crucial identification number for those responsible for deducting or collecting tax at source. Issued by the Income Tax Department (ITD), this ten-digit alphanumeric number plays an essential role in the taxation process. This article explores everything you need to know about TAN, from its purpose to the application process.

What is TAN?

TAN stands for Tax Deduction and Collection Account Number. It is a unique, ten-digit alphanumeric code assigned by the Income Tax Department to individuals or entities who are responsible for deducting tax at source (TDS) or collecting tax at source (TCS). Under Section 203A of the Income Tax Act, 1961, it is mandatory to quote this number in various tax-related documents, including TDS/TCS returns, payment challans, and certificates. Failure to quote TAN in these documents could result in penalties.

Who Needs to Obtain TAN?

TAN must be obtained by every individual, company, or organization responsible for deducting tax at source or collecting tax at source. This includes a wide range of individuals and entities such as employers, companies, and financial institutions involved in TDS or TCS processes. However, under certain sections (194IA, 194IB, 194M, and 194S), specific individuals or entities can use their PAN in place of TAN.

• Section 194IA: Deduction of tax at source on the transfer of certain immovable properties (except agricultural land).
• Section 194IB: Deduction of tax at source on rent payments for immovable properties.
• Section 194M: Deduction of tax at source on payments made to contractors or professionals.
• Section 194S: Deduction of tax at source on payments related to virtual digital assets.

Importance of TAN

TAN is mandatory for various documents related to TDS/TCS, and it ensures that the tax collection and deduction process is streamlined and traceable. The following documents must contain the TAN number:

• TDS/TCS Statements or Returns: This includes all TDS/TCS returns that are filed with the Income Tax Department.
• TDS/TCS Payment Challans: Challans used for depositing TDS/TCS payments must include the TAN.
• TDS/TCS Certificates: These certificates must mention the TAN of the deductor or collector.
• Income Tax Forms: Other related forms that require tax identification must also include TAN.

Failure to apply for or quote TAN results in a penalty of Rs. 10,000, as per Section 272BB of the Income Tax Act.

TAN Structure

The structure of TAN consists of ten alphanumeric characters:

1. First Four Letters: The first three letters represent the jurisdiction where the TAN is issued, and the fourth letter denotes the initial of the applicant (entity or individual).
2. Next Five Digits: These are unique numbers assigned by the system to identify the applicant.
3. Last Letter: A unique letter generated by the system.

Application Process for TAN

TAN can be applied for both offline and online.

Offline Application

• Applicants can submit Form 49B (Application for allotment of Tax Deduction and Collection Account Number) to any TIN Facilitation Centre (TIN-FC).
• No supporting documents are required at the time of submitting the form in person, but the necessary fees must be paid.

Online Application

• Applicants can visit the NSDL website to fill out and submit the online application form.
• After submitting the form, they will receive an acknowledgment number and must print it.
• The applicant can then send the printed acknowledgment along with the required fee (online or through demand draft/cheque) to the NSDL office.
• Once the application is processed, NSDL will send the TAN details to the applicant’s registered address.

TAN Application Fees

The fee for applying for TAN is Rs. 65 (inclusive of GST).

TAN Search

Taxpayers can search for the TAN of the tax deductor or collector via the e-Filing Portal. The process is as follows:

1. Visit the e-Filing portal homepage.
2. Click on Know TAN Details under the Quick Links section.
3. Enter the deductor’s name, state, and mobile number.
4. Validate the details using an OTP.
5. A list of matching records will appear. Click on the correct record to view the deductor's details.

Consequences of Not Obtaining TAN

Failure to apply for or use TAN correctly can result in serious consequences. Under Section 203A of the Income Tax Act, it is mandatory for all individuals or entities involved in TDS or TCS processes to obtain and quote TAN. If TAN is not quoted on required documents, a penalty of Rs. 10,000 is levied.

In addition, if an employer fails to obtain TAN, they cannot deposit TDS or file TDS statements, and employees whose taxes are not deducted at source may have to pay self-assessment tax or advance tax themselves.

Conclusion

TAN is an essential component of India's tax system, enabling effective tax collection and deduction processes. All individuals or entities involved in TDS or TCS must ensure that they obtain and quote TAN correctly to avoid penalties and ensure compliance with the Income Tax Act. The process of applying for TAN is simple, with both offline and online options available, making it accessible to all taxpayers. Ensuring that your TAN is correctly used in all required documents is crucial for smooth tax filings and avoiding any legal issues.

If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924.

 Stay Updated, Stay Compliant! 

Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.