Tax Deduction and Collection Account Number (TAN) is a vital identification number issued by the Income Tax Department (ITD) for individuals and entities responsible for deducting or collecting taxes at source. This ten-digit alphanumeric code plays an essential role in ensuring a smooth and traceable taxation process. Below, we cover the key aspects of TAN, including its purpose, the application process, and its importance in tax compliance.
What is TAN?
TAN, or Tax Deduction and Collection Account Number, is a unique 10-digit alphanumeric identifier assigned by the Income Tax Department to individuals and organizations that are required to deduct or collect taxes at source (TDS/TCS). According to Section 203A of the Income Tax Act, 1961, quoting TAN is compulsory on various tax-related documents, such as TDS/TCS returns, payment challans, and certificates. Failing to do so could lead to penalties.
Who Must Apply for TAN?
TAN is necessary for every individual, company, or entity responsible for deducting tax at source or collecting tax at source. This includes employers, businesses, and financial institutions involved in TDS or TCS processes. However, certain individuals or entities may use their PAN (Permanent Account Number) instead of obtaining a TAN under specific sections of the Income Tax Act:
- Section 194IA: Deduction of tax on the transfer of certain immovable properties (other than agricultural land).
- Section 194IB: Deduction of tax on rent payments for immovable properties.
- Section 194M: Deduction of tax on payments made to contractors or professionals.
- Section 194S: Deduction of tax on payments related to virtual digital assets.
Why is TAN Important?
TAN is mandatory for several key documents related to TDS/TCS, helping ensure that tax deductions and collections are accurately processed. The following documents require the inclusion of TAN:
- TDS/TCS Statements or Returns: Any return filed with the Income Tax Department that pertains to TDS or TCS.
- TDS/TCS Payment Challans: These documents used to make TDS/TCS payments must display the TAN.
- TDS/TCS Certificates: These certificates issued by the deductor or collector must also include the TAN.
- Income Tax Forms: Various other forms requiring tax identification need to have the TAN.
Failure to apply for or quote the TAN correctly can result in a penalty of Rs. 10,000, as stipulated in Section 272BB of the Income Tax Act.
The Structure of TAN
The TAN consists of 10 alphanumeric characters, structured as follows:
- First Four Characters: The first three characters represent the jurisdiction where the TAN is issued, and the fourth character is the first letter of the applicant’s name.
- Next Five Digits: These five numbers are unique identifiers generated by the system.
- Last Character: The final character is a letter assigned by the system.
How to Apply for TAN
There are two methods for applying for TAN: offline and online.
Offline Application
To apply offline, the applicant must submit Form 49B (Application for allotment of TAN) to any TIN Facilitation Centre (TIN-FC). No supporting documents are needed at the time of submission, but the necessary fee must be paid.
Online Application
For online applications, applicants can visit the NSDL website, complete the form, and submit it electronically. After submission, an acknowledgment number will be generated. The applicant must then print the acknowledgment and send it to the NSDL office along with the payment (which can be made online or via demand draft/cheque). Once the application is processed, the TAN details will be sent to the applicant’s registered address.
TAN Application Fees
The fee for applying for TAN is Rs. 65, including Goods and Services Tax (GST).
How to Search for TAN
If you need to find the TAN of a tax deductor or collector, you can use the Know TAN Details service on the e-Filing portal. Here’s how:
- Visit the homepage of the e-Filing portal.
- Click on the Know TAN Details under the Quick Links section.
- Enter the deductor’s name, state, and mobile number.
- Validate the details via OTP.
- A list of matching records will be shown. You can click on the correct record to view the relevant details.
Consequences of Not Applying for or Using TAN Correctly
Failure to obtain or correctly quote TAN can lead to serious consequences. Section 203A of the Income Tax Act requires that all individuals or entities involved in TDS or TCS processes obtain and quote TAN. Non-compliance can result in a penalty of Rs. 10,000.
If an employer fails to obtain TAN, they will be unable to deposit TDS or file TDS statements. Additionally, employees whose TDS is not deducted may need to pay self-assessment or advance tax themselves.
Conclusion
TAN is a critical element in India’s taxation system, ensuring smooth and efficient tax deduction and collection processes. Any individual or entity involved in TDS or TCS must apply for and use TAN to stay compliant with tax regulations. The application process is simple and can be completed offline or online. Correctly using TAN in all relevant documents is crucial for avoiding penalties and ensuring proper tax filings.
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.