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What is TAN? Meaning and Importance

  • Highlights

  • TAN is mandatory for individuals or entities deducting tax

  • There is penalty for not quoting TAN in some documents

  • Use TAN for all tax deductions and collections

  • Use single TAN for tax collected and deducted at source

The primary purpose of the Tax Deduction and Collection Account Number, commonly known as TAN, is related to deduction or collection of tax at source. Under Section 203A of the Income Tax Act, obtaining TAN is compulsory for individuals or businesses who are mandated by the government to deduct or collect tax.

What is the structure of TAN?

As a 10-digit alpha-numeric identifier, TAN has a unique structure. With the first four letters at the beginning, TAN has five numerals in the middle and a letter at the end. The components of TAN represent the following:
a. The first three letters represent the jurisdiction where the TAN was issued
b. The fourth alphabet in the TAN is the initial letter of the name of the individual or entity deducting or collecting tax
c. The remaining six characters (five numerals and the last alphabet) are system-generated.

A combination of these components gives TAN a unique identity.

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What is the importance of TAN?

Failure to quote TAN Number in documents can result in a penalty of Rs. 10,000. As per Section 203A of the Income Tax Act 1961, it is mandatory to quote TAN in the following documents:
(a) TDS statements i.e. returns
(b) TCS statements i.e. returns
(c) Statement of financial transactions or reportable accounts
(d) Challans for payment of TDS/TCS
(e) TDS/TCS certificates
(f) Other documents, as prescribed

What happens if you default?

Section 272BB of the Income Tax Act 1961 provides for a penalty of Rs. 10,000 in case the entity or individual collecting or deducting tax,fail to get the TAN or furnishes incorrect TAN details on the required documents.

How to apply for TAN?

An online application for allotment of TAN can be made by visiting the NSDL-TIN website (www.tin-nsdl.com). Offline mode of application is also allowed for allocation of TAN, wherein you need to visit a TIN Facilitation Centre and make the application on Form 49B.

Additional Read: How to Apply for TAN

Do I need separate TANs for TCS and TDS?

A single TAN Number in India can be used both for TCS and TDS, and hence you don’t need to make multiple applications. if once you get your TAN Number, it can be used for all type of deductions and collections. It is illegal for individuals or entities to hold or use more than one TAN. However, a single entity may acquire different TANs for its different branches or divisions.

For individuals or businesses paying salary or commission to anyone, possessing TAN is mandatory. In case you’re unable to remember your TAN, the Income Tax Department makes a ‘Know your TAN’ provision whereby you can find out your TAN online by filling in the requisite details.

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