In this article, you will learn:
Section 203A of the Income Tax Act, 1961 provides that every person deducting tax or collecting tax at source is required to apply for Tax Deduction and Collection Account Number (TAN). TAN Number is used by persons deducting or collecting tax at source on various documents including the TDS/TCS Statements, Return Statements, Challans etc.
Furthermore, in case such persons fail to obtain TAN or furnish incorrect TAN, the Income Tax Department charges penalty to such persons.
In this article, you will learn, what is TAN, structure of TAN, persons liable to apply for TAN, procedure to obtain etc.
What is TAN?
Tax Deduction and Collection Account Number is a 10 digit alphanumeric number issued by the Income Tax Department of India.
As mentioned above, as per section 203A of the Income Tax Act, 1961, it is necessary for persons deducting or collecting tax at source to mention TAN provided by the Income Tax Department on all TDS/TCS Returns.
Structure of TAN
The 10 digit TAN Number comprises of both alphabets and numbers. The first four characters of TAN are alphabets. The next 5 characters are numeric and the last character again is an alphabet.
- The first three characters of the TAN are the alphabets that represent the Jurisdiction Code
- Fourth Character is an alphabet that indicates the initial of the name of the TAN holder, who can be a company, a firm, an individual etc.
- Next five characters are numerals that are system generated
- And the last character is also an alphabet that is system generated
For example, say TAN is allotted to Mr Aryan Sisodiya who belongs to Delhi. Thus, the TAN in such a case would appear as follows: DEL A 56789 B.
Who Needs To Apply for TAN?
As mentioned above, persons who are liable to deduct tax at source or collect tax at source must obtain TAN from the Income Tax Department. There are, however, exceptions to such a provision. These are as follows:
- Persons deducting tax under section 194-IA of the Income Tax Act can use PAN instead of TAN as such persons need not require TAN.
- The persons deducting tax under section 194-IB or section 194-M need not obtain TAN.
According to Section 194-IB, an individual or HUF whose books of accounts are not required to be audited as per section 44AB, are responsible for deducting tax at the rate of 5% while paying rent towards any land, building or both to a resident person. Provided the amount of such a rent is more than Rs 50,000 for a month or part of month.
Likewise, as per section 194-M of the Income Tax Act, 1961, any individual or HUF whose books of accounts are not required to be audited as per section 44AB need to deduct tax at the rate of 5%.
Such a tax is deducted from the amount paid or credited to a resident in a year in respect of the contractual work, brokerage, professional fees or commission (this does not include insurance commission as specified in section 194-D. Provided the total amount paid is more than Rs 50 Lakhs in a year.
Why is TAN Required?
As specified above, as per section 203A of the Income Tax Act, 1961, persons deducting or collecting tax at source must apply for a TAN number. Furthermore, according to this section TAN must be quoted on all the following documents:
- Challans for paying TDS/TCS
- TDS/TCS Certificates
- The TDS Statements that is Return
- TCS Statements that is Return
- Statement of Financial Transactions or reportable accounts
- Other documents as may be suggested
It must be noted that the provisions in respect of obtaining TAN do not apply to a person who is required to deduct tax as per section 194-IA. This section refers to the sale proceeds received by the individual in respect of land or building.
Furthermore, the provisions of obtaining TAN also do not apply to such persons as may be notified by the Central Government.
Penalty For Quoting Incorrect TAN
The Income Tax Department of India imposes penalty in the following two cases with regards to failure to comply with the provisions of obtaining/quoting TAN.
(i) Failing to Comply With Section 206CA
As per section 272BBB of the Income Tax Act, 1961, persons liable to collect or deduct tax who fail to comply with the provisions of section 206CA would be charged with a penalty. Section 206CA deals with quoting TAN on all the documents as specified under the given section. Accordingly, if the persons liable to collect or deduct tax at source fail to quote TAN on all such documents, they would be charged a penalty of Rs 10,000.
(ii) Non-Compliance of Section 203A
Likewise as per section 272BB(1), any person who fails to comply with the provisions of section 203A also would be liable to pay a penalty of Rs 10,000. In other words, any person required to collect or deduct tax at source must obtain TAN as per section 203 A. In case he fails to do, he would be charged a penalty of Rs 10,000.
(iii) Failure to Comply With Section 272BB(IA)
Furthermore section 272BB(1A) further provides for the cases where persons liable to deduct or collect tax at source quote an incorrect TAN on the documents such as TDS/TCS Certificates, TDS/TCS Returns etc. In such a case too, persons would be liable to pay a penalty of Rs 10,000.
Procedure to Obtain TAN
There are two modes via which persons liable to deduct or collect tax at source can apply for TAN.
By visiting the tin-nsdl.com, you need to fill Form 49B online and submit the same on the portal itself to obtain Tax Deduction or Collection Account Number (TAN).
There are two types of TAN Application. One is application for obtaining New TAN (Form 49B). This application form is used when you have never applied for TAN or do not have TAN.
The other is for change or correction in TAN data for TAN allotted . This needs to be used in case you already have a TAN but need to make corrections in the information provided for TAN.
Persons liable to collect or deduct tax at source need to make an application for the allotment of TAN in Form 49B in duplicate. Form 49B is free and can be downloaded from either tin-nsdl.com or incometaxindia.gov.in.
Further, this needs to be submitted to any TIN-FC, that is, TIN Facilitation Centres. You can search for the Facilitation Centres near your location at tin-nsdl/tin-facilities.
In addition to this, legible photo copies of Form 49B are also allowed to be used for making an application to obtain TAN.
In case, the applicant is a company which is not registered under the Companies Act, 2013, such an application for the allotment of TAN needs to be made in Form No. INC-32 (Open SPICe) as per section 7(1) of Companies Act for the incorporation of the Company.
Authority To Allot TAN
The authority to allot TAN rests with the Income Tax Department of India (ITD). ITD makes such an allotment based on the application submitted by the Deductor either online at the tin-nsdl website or offline to TIN-FC’s managed by the NSDL.
The NSDL then intimates TAN to the applicant at the address that is mentioned in the application.
Documents for TAN Application
No additional documents are required to be furnished along with the application for TAN made through Offline mode.
However, the applicant needs to send signed acknowledgement to the NSDL if application for TAN is made through Online mode. This acknowledgement is generated once the applicant fills Form 49B Online.
Ques. Is separate TAN required for the purpose of TCS?
Ans. No. The collector of tax at source need not require a separate TAN for the purpose of TCS in case such a person has already TAN for TDS. That is to say that TAN allotted for TDS can be used for the purpose of TCS as well.
Ques. Can a single TAN be used in case of a deductor who is required to deduct tax from different types of payments such as salary, interest payment etc.?
Ans. Yes. Single TAN can be used by the Deductor to deduct tax from different types of payments. That is to say it is not necessary to apply for separate TAN at that TAN once provided can be used for all types of collections and deductions.
Ques. How can I track status of TAN Application?
Ans. You can track TAN Application Status by using Status Track Tool provided by the NSDL. Click ‘TAN Application Status‘ to check your TAN application status online. You can also do so by providing your acknowledgement number after three days of making application.
You can also check the status of your TAN Application by the tool provided by incometaxindia.gov.in.
Ques. Are government deductors also liable to obtain TAN?
Ans. Yes. Like any other non-government deductor, the government deductors are also liable to apply for TAN.
Ques. Can PAN be quoted in place of TAN?
Ans. It must be noted that PAN should never be used in the field wherever TAN is required to be specified. That is to say person liable to deduct or collect tax cannot use PAN in place of TAN. If such a person does not have TAN, he must apply for the same.
However, as mentioned above, persons who are liable to deduct tax as per section 194-IA can use PAN in place of TAN as such persons are not required to obtain TAN.
Ques. Can taxpayer hold more than one TAN?
Ans. It must be noted that it is illegal to have or use more than one TAN. However, different branches or divisions of a business entity may have a separate TAN.
Where more than one TAN has been allotted, TAN that has been used regularly must be used and other TAN(s) can immediately be surrendered for cancellation.
This can be done by using the facility for Form for Changes or Correction of TAN’ either by downloading it from the tin-nsdl website or obtaining the same from a TIN-FC.