In India, the Income Tax department of the Central Government issues a 10-digit alphanumeric number to all persons who bear the responsibility of collecting tax at source (TCS) or deducting tax at source (TDS). This number is unique and is known as the TAN. Under Section 203A of the IT Act of 1961, the TAN number has to be quoted on all TDS returns filed.
The acronym ‘TAN’ stands for Tax Deduction and Collection Account Number.
This number is an essential part of the tax compliance mechanism under Indian laws.
TAN Number Meaning and Structure
The structure of this 10-digit unique identifier has undergone several revisions over the years. The current structure has 4 alphabets at the start, followed by 5 numerals and ends with an alphabet again.
The identifier has several details encoded using this combination of letters and numerals. These details are broken down as mentioned below –
- The TAN number’s first 3 alphabets represent the holder’s jurisdiction code.
- The 4th alphabet is the initial of the holder’s name. It must be remembered that a TAN number can be allotted to an individual or an enterprise, like a company or a firm, of any sort. In such an instance, the company or organisation is treated as an individual.
- The next 5 numbers are exclusive identifying numerals with no added significance.
- Finally, the last alphabet acts merely as a unique identifying entity.
The structure can be better understood with two examples, albeit fictional ones.
1. If a certain Mr Mahesh from Rajasthan files tax returns at source, his TAN number will look like – RAJM99999B
- RAJ indicates the jurisdiction which, in this example, is the state of Rajasthan.
- The 4th alphabet, ‘M’, refers to the first character of its holder’s name.
- The next 5 numerals and the last letter serve as a unique ID.
2. When a certain Delhi-based firm, XYZ Pvt Ltd, is allotted a TAN, it may look like this – DELX12345M
- ‘DEL’ indicates that any legal issues will be dealt with only by competent jurisdictional authorities within the city of New Delhi.
- ‘X’ is the first character of the company’s registered name.
- The remaining letters serve the same purposes as the previous example.
Relevance of this Number
It is imperative that you know your TAN no. Without it, you are certain to face a series of difficulties while filing your tax returns.
Following are some reasons why holding a Tax Deduction and Collection Account Number is necessary. Note that all these provisions are clauses and conditions under Section 203A of the IT Act, 1961.
- You cannot file TCS or TDS statements if you do not have a TAN.
- This number is required when you seek challans for TDS or TCS payments; without it, you cannot procure these documents.
- Unless you can quote your TAN number, you will not be able to submit either TDS or TCS certificates. This may result in problems in the IT documentation process and plenty of persisting issues later.
- Lastly, without the Tax Deduction and Collection Account Number, it is impossible to collect or submit a wide variety of IT-related forms.
Here, it is crucial to note that there is an important exception when it comes to obtaining and quoting the TAN. The number is not mandatory for any individual who deducts tax under Section 194-1A of the IT Act of 1961.
This section applies to taxation/s for sales consideration of fixed assets like a plot of land or a building.
What Happens if the TAN is Not Quoted?
If an individual or a firm is yet to obtain a TAN number, Section 272BB(1) of the ITA, 1961, imposes a penalty.
Also, if an incorrect TAN is quoted, Section 272BB(2) has the authority to impose a penalty.
The maximum penalty that can be imposed under Section 272BB is Rs. 10,000.
Obtain and Know Your TAN
You can choose between either online or offline methods to apply for and obtain a TAN. Most applications nowadays are routed through an online channel. The application process has been made very efficient due to online single-window services.
A deductor applying for a TAN number can do so by logging on to the official NSDL-TIN website.
The process to be followed is mentioned here –
- Upon clicking on the requisite link, a ‘Register Yourself’ page will show up. Here, all necessary information must be uploaded. All details must be uploaded correctly and without any mistakes.
- Once this information is successfully uploaded, an acknowledgement page will appear. This page has several essential sections that must be preserved until a TAN is successfully allotted.
- This acknowledgement page will have details like –
- A 14-digit unique acknowledgement number.
- All your contact and payment details.
- Name and status of the applicant.
- A sizeable blank space for your signature.
- Please take a print-out of this acknowledgement page. Until you receive your TAN, you must preserve it carefully.
- The applicant must sign within the space provided, and ensure that it does not spill-over into other areas.
- Provisions for thumb imprints are also available. However, it should be verified and attested by competent authorities, including Gazetted officers and Magistrates, among others.
Payment for Online TAN Application
The total amount the applicant has to pay for online TAN allotment is Rs. 55 plus 18% GST.
Prior to GST implementation, individual states would levy their respective service charges. Now, this amount is the same across India.
The payment can be completed in multiple ways including –
- Cheque payment.
- Demand Drafts.
- Electronic payments, including Net-Banking and online transfer.
Offline Method to Apply for and Know Your TAN
The offline method still exists for those who are not well-versed with online procedures. Applicants must obtain a copy of Form 49B and complete all the details required before submitting it to their nearest TIN-FC centre.
How to Obtain Form 49B?
One of the problems which a lot of applicants face is scant information on the availability of this Form. Please note that it can be procured in multiple ways –
- It can be downloaded for free from the IT department’s official website.
- The Form may also be freely obtained at any TIN-FC centre.
- Lastly, any legible photocopy of this Form is also accepted at NSDL centres.
Once you have deposited this Form with all details mentioned, you can know your TAN no. as soon as the request is processed. Note that you do not have to submit any documents when applying offline.
How to Search TAN?
Individuals who have misplaced their TAN number can easily check all the TAN details online following these simple steps:
- Log on to the IT Department’s official website and click on ‘Know your TAN.’
- A new page with the option ‘TAN search’ will appear. Select ‘Name’.
- Select ‘Category of Deductor’ carefully.
- Next, select your ‘State’ (for jurisdictional purposes), put in your ‘Name’ and registered mobile number.
- Click on the ‘Continue’ tab.
- An OTP will be sent to your registered mobile number. Insert it in the appropriate column on the next page.
- Now, click on ‘Validate’ to complete the process.
The TAN details will be displayed on the next page.
Comparing TAN and PAN
While they are issued by the same authority- the Income Tax Department of India– there are several points where these two differ. Here is a brief explanation on TAN vs PAN.
|Issued by||The IT Department||-do-|
|Identifying code||10-digit alphanumeric code||-do-|
|Primary purpose||Acts as an all-in-one code or permit for every financial transaction.||Helps make TDS processes easier.|
|Required by||Every taxpayer||All individuals and firms having to pay tax at source.|
|Governing laws||Section 139 of the IT ACT (1961)||Section 203A of the same Act|
|Penalties and fines associated||Rs. 10,000 if an individual/firm fails to furnish PAN||-do-|
|Necessary forms to be filled up||1. For Indian citizens-Form 49A
2. For foreigners- Form 49AA
|Form 49B is the sole document needed|
|Maximum number of units that can be held||One||One|
|Documents required for application||1. Valid and current ID proof with photograph
2. Proof of age (i.e. DOB)
3. Copies of photographs (reqd. only if the applicant is an individual)
|1. No documents needed for offline TAN no application
2. In online instances, a signed acknowledgement is enough.
|Application costs||1. Rs. 93 plus GST for Indians.
2. Rs. 864 plus GST for foreigners.
|Rs. 55 plus GST.|
TAN Number Rectification and Other Issues
For all problems pertaining to TAN, including instances where one wishes to cancel the number, an individual can visit NSDL’s official website and make the necessary changes.
Please note that the Government of India has been planning a makeover of this prevailing system for applying for and receiving a TAN number. Already, the CBDT and the Ministry of Corporate Affairs (MCA) have issued orders which does away with filing both TAN and PAN for organisations.
Instead, a single form, called ‘SPICe’ form or Form INC-32 will cover the basics. These are plans to encourage the ‘Ease of Doing Business’ in the country and are expected to help bolster the growth of businesses in the future.