What is TAN?

6 mins read
by Angel One
Explore what is TAN and know its relevance in this comprehensive guide. Uncover TAN structure, explore the advantages it offers, and understand the key steps for achieving effortless tax compliance

If you’re someone responsible for deducting or collecting taxes at the source, having a Tax Deduction and Collection Account Number (TAN) is crucial. Remember, you need to use your TAN card when filing Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) returns. Failing to get a TAN or not following the rules in Section 203A of the Income Tax Act could lead to penalties. 

In this article, we’ll explore what is TAN, walk you through the steps to get one and cover all the essential details you need to know.

What is TAN Number – Meaning and Structure

The TAN Number, a 10-digit unique identifier, holds a structure that has seen various revisions. Its current form comprises 4 alphabets at the beginning, followed by five numerals, and concludes with another alphabet. Here’s a breakdown of the details encoded within this combination of letters and numerals:

  • Jurisdiction Code

The first three alphabets of the TAN number signify the holder’s jurisdiction code, offering insights into their geographical location.

  • Initial of Holder’s Name

The 4th alphabet represents the initial of the holder’s name. A TAN number can be assigned to individuals or entities like companies or firms. In such instances, the organisation is considered as an individual entity.

  • Identifying Numerals

The following 5 numbers are exclusive identifiers, lacking additional significance but contributing to the TAN number’s uniqueness.

  • Unique Identifying Entity

The last alphabet acts as a unique identifier, adding to the distinctiveness of the TAN number.

The Relevance of This Number

Tax Deduction and Collection Account Number plays a crucial role in ensuring a smooth tax compliance process, guided by the provisions in Section 203A of the IT Act, 1961. Here’s why possessing a TAN is not just a recommendation but a necessity:

  • Filing TCS/TDS Statements

TAN is the prerequisite for filing TCS or TDS statements. Without it, the submission process is halted, potentially causing delays and complications in your tax compliance.

  • Challans for TDS/TCS Payments

Making TDS or TCS payments requires your TAN. It is the essential identifier for obtaining the necessary challans, ensuring a straightforward payment process.

  • Submission of TDS/TCS Certificates

Your TAN is crucial when submitting TDS or TCS certificates. Failing to provide this identifier may disrupt the IT documentation process, leading to complications in the future.

  • IT-Related Forms

TAN is a critical identifier for various IT-related forms, simplifying the collection and submission process. It is an indispensable tool in navigating through tax-related paperwork.

It’s important to note that individuals selling fixed assets like land or buildings under Section 194-1A of the IT Act of 1961 are exempted from the mandatory TAN requirement in those circumstances. However, for most other tax-related activities, having and utilising your TAN is fundamental for navigating the complexities of tax regulations efficiently.

What Happens if the TAN Is Not Quoted?

Failure to obtain and quote a Tax Deduction and Collection Account Number can result in penalties per the Income Tax Act, 1961 provisions. Here’s a breakdown:

  • No TAN Obtained

If an individual or a firm cannot obtain a TAN number, Section 272BB(1) of the Income Tax Act, 1961, mandates the imposition of a penalty.

  • Incorrect TAN Quoted

Quoting a wrong TAN also carries consequences. Section 272BB(2) empowers the imposition of a penalty for providing inaccurate TAN details. 

The maximum penalty under Section 272BB is ₹10,000. Individuals and entities must adhere to the TAN requirements to avoid these financial penalties and ensure compliance with the Income Tax Act.

Types of TAN Applications

There are two primary types of TAN applications. The first involves applying for the issuance of a new TAN, while the second TAN application pertains to the form used for changes or corrections in the TAN for an already allotted number.

Obtain and Know Your TAN

If you’re a deductor looking to apply for a TAN number, the process is pretty straightforward on the official NSDL-TIN website. Just follow these steps:

 

  1. Start by clicking the designated link, which will take you to the ‘Register Yourself’ page. Fill in all the necessary details accurately to ensure a smooth application process.
  2. An acknowledgement page will pop up once you’ve successfully uploaded the required information. This page is crucial and contains vital sections you must preserve until your TAN is allotted. It includes a 14-digit unique acknowledgement number, contact and payment details, name and status, and a space for your signature.
  3. Print out this acknowledgement page and keep it safe until you receive your TAN. This printed copy is essential for reference.
  4. Don’t forget to sign within the designated space on the acknowledgement page, ensuring your signature doesn’t extend beyond the allocated area.
  5. If you provide thumb imprints, ensure they are verified and attested by competent authorities, such as Gazetted officers and Magistrates. Following these steps will guide you smoothly through obtaining and securing your TAN.

Payment for Online TAN Application

Obtaining an online TAN allotment costs ₹55 plus 18% GST. It’s noteworthy that before implementing the Goods and Services Tax (GST), individual states used to impose their specific service charges. However, post-GST, this amount is standardised throughout India. Payment for the online TAN application can be made through various methods, including cheque payments, demand drafts, and electronic payments such as net banking and online transfers.

Offline Method to Apply for and Know Your TAN

For those less familiar with online procedures, the offline method remains available for applying for and obtaining a TAN. To do this, applicants need to procure a copy of Form 49B and diligently fill in all the required details. Subsequently, the completed form should be submitted to the nearest TIN-FC (Tax Information Network – Facilitation Centre).

How to Obtain Form 49B?

Obtaining Form 49B can pose a challenge for applicants due to limited information on its availability. However, it can be acquired through various means:

  • Download from Official Website

Form 49B is available for free download from the official website of the Income Tax Department.

  • TIN-FC Centre

You can also obtain a copy of Form 49B without any cost from any Tax Information Network – Facilitation Centre (TIN-FC).

  • NSDL Centres

Legible photocopies of the form are accepted at NSDL (National Securities Depository Limited) centres.

Once you have the form and complete all the necessary details, you can submit it to kickstart the TAN application process. Importantly, when applying offline, submitting any supporting documents is not required. After the processing of your request, your TAN number will be provided.

Check the Status of the TAN Application

After applying for a TAN, you’ll receive a 14-digit acknowledgement number. To check the status of your application, visit the official portal, choose the ‘TAN’ option, click on ‘Know Status of Application,’ select your applicant type, enter the acknowledgement number, fill in the captcha, and click ‘submit.’ This straightforward process allows you to track the progress of your TAN application easily.

How to Search TAN?

If you’ve misplaced your TAN number, you can easily retrieve all the details by following these simple steps:

  1. Go to the Income Tax Department website. Look for the ‘Know your TAN’ section.
  2. Once there, choose the ‘TAN search’ option and opt for ‘Name.’
  3. Pick the category that best describes you as a deductor.
  4. Select your state for jurisdictional purposes, and provide your name and registered mobile number.
  5. Press ‘Continue’ to proceed.
  6. Expect to receive an OTP on your registered mobile number. Enter this OTP in the designated column on the next page.
  7. Click ‘Validate’ to wrap up the process. Your TAN details will then be displayed on the next page.

Comparing TAN and PAN

While both PAN and TAN are issued by the same authority, they serve distinct purposes and differ in several aspects. Here’s a breakdown of the comparison between PAN and TAN:

 

Comparison Parameters PAN TAN
Issued by The Permanent Account Number (PAN) is issued by the Income Tax Department of India. The Tax Deduction and Collection Account Number (TAN) is also issued by the Income Tax Department of India.
Identifying code PAN comprises a unique 10-digit alphanumeric code that serves as a universal identifier for individuals and entities for various financial transactions. Similarly, TAN also consists of a 10-digit alphanumeric code, providing a distinctive identification for entities involved in Tax Deduction at Source (TDS) processes.
Primary purpose PAN serves as an all-encompassing code essential for a wide range of financial transactions, including filing tax returns, opening bank accounts, and conducting significant financial activities. TAN, on the other hand, primarily facilitates and streamlines Tax Deduction at Source (TDS) processes, ensuring smooth withholding of taxes.
Required by Every taxpayer, including individuals, companies, and businesses, needs to obtain a PAN for various financial and taxation purposes. TAN is specifically required by individuals and firms involved in making tax payments at the source, enabling proper deduction and collection of taxes.
Governing laws PAN is governed by Section 139 of the Income Tax Act (1961), outlining its legal foundation and the obligations associated with its possession. TAN operates under Section 203A of the same Income Tax Act, specifying its role and obligations in facilitating tax deductions at the source.
Penalties and fines associated Failure to furnish a PAN incurs a penalty of ₹10,000, emphasizing the importance of accurate PAN details for taxation purposes. TAN, in the provided context, does not specify penalties, but accurate information is crucial for effective tax withholding.
Necessary forms to be filled up Indian citizens use Form 49A for PAN applications, while foreigners use Form 49AA, with these forms capturing essential details for proper identification. TAN requires the submission of Form 49B, a comprehensive document collecting necessary information for entities involved in tax deduction at the source.
Number of units held Each individual or entity is allowed to hold only one PAN, streamlining identification processes and avoiding duplication. Similar to PAN, TAN also allows entities to hold only one unit, ensuring a unique identification code for each entity involved in TDS processes.
Documents required for application PAN applications necessitate valid ID proof with a photograph, proof of age, and photographs (if the applicant is an individual), ensuring accurate and reliable identification. TAN applications, particularly for offline submission, do not require additional documents. For online applications, a signed acknowledgement is sufficient, simplifying the application process.
Application costs The cost for PAN application is ₹93 plus GST for Indian citizens and ₹864 plus GST for foreigners, reflecting the administrative expenses involved in issuing this crucial identifier. TAN application costs ₹55 plus GST, making it an affordable process for entities involved in tax deduction at the source.

TAN Number Rectification and Other Issues

To address TAN-related issues, like corrections or cancellations, individuals can easily visit NSDL’s official website for necessary changes. Notably, the government of India is simplifying the process of obtaining a TAN number. Orders from the CBDT and the Ministry of Corporate Affairs (MCA) have streamlined the system, eliminating organisations’ need to file separate TAN and PAN forms. Instead, they can use a single form, the ‘SPICe’ form or Form INC-32, covering all the essential details.

Conclusion 

In conclusion, a Tax Deduction and Collection Account Number is a vital identifier for those responsible for deducting or collecting taxes at the source. Ensuring its proper use, from filing Tax Deducted at Source and Tax Collected at Source returns to abiding by the provisions in Section 203A of the Income Tax Act, is crucial to avoid penalties.

FAQs

Who issues TAN?

TAN is issued by the Income Tax Department of India, facilitated through NSDL (National Securities Depository Limited) and UTIITSL (UTI Infrastructure Technology and Services Limited). Applications can be submitted online via the NSDL-TIN website or at facilitation centres.

Is there a fee for obtaining TAN?

Yes, there is a fee for obtaining TAN, which amounts to ₹65 + GST for the TAN application.

Can I make online payments for TAN?

Certainly, you can make online payments for TAN through the NSDL website using debit cards, credit cards, or net banking.

Do I need separate TANs for TDS and TCS?

No, you can use the same TAN for both Tax Deduction at Source (TDS) and Tax Collection at Source (TCS). It is not mandatory to obtain different TANs for these purposes.