If you’re responsible for deducting or collecting taxes in India, you’ve likely heard about TAN (Tax Deduction and Collection Account Number). But what is it, why is it important, and how can you get one? This guide will break it all down in a simple and easy-to-understand way, helping you understand the process and its significance.
What is TAN?
TAN is a unique 10-digit alphanumeric code assigned by the Income Tax Department to people or organizations responsible for deducting tax at source (TDS) or collecting tax at source (TCS). The number is essential for a variety of tax-related tasks, including:
- Filing TDS returns
- Filing TCS returns
- Making TDS payments
- Issuing TDS certificates
Without a valid TAN, your tax documents (such as TDS returns or TCS certificates) won’t be accepted by the authorities. In short, if you are involved in tax deductions or collections, you must have a TAN.
Why Do You Need TAN?
Having a TAN is required under the Income Tax Act, specifically under Section 203A. If you fail to get one or don’t quote it correctly on required documents, you could face a fine of up to ₹10,000. This penalty comes under Section 272BB of the Income-tax Act.
So, why is TAN so important? It ensures that your tax-related documents are compliant with the law, and helps avoid penalties for mistakes.
Who Needs to Apply for a TAN?
If you are responsible for deducting taxes at source (TDS) or collecting taxes at source (TCS), you will need a TAN. This includes:
- Businesses
- Organizations
- Individuals who have tax deduction or collection responsibilities
However, there are some exceptions where you can use your PAN (Permanent Account Number) instead of TAN. These exceptions apply under the following sections:
- Section 194IA: When transferring immovable property (except agricultural land).
- Section 194-IB: When paying rent over ₹50,000/month (if you’re an individual or Hindu Undivided Family).
- Section 194M: If you’re paying over ₹50 lakh for services like contracts or professional fees.
In these cases, you can use your PAN instead of TAN.
How to Apply for TAN
You can apply for TAN in two ways: online or offline. Here’s a simple breakdown of both methods:
1. Online Method
- Visit the NSDL-TIN website and fill out the TAN application form (Form 49B).
- Once you’ve filled out the form, you’ll receive an acknowledgment number.
- Send the signed acknowledgment, along with the processing fee, to the NSDL office in Pune.
The processing fee for TAN is ₹65, which includes ₹55 as the application charge plus 18% GST.
2. Offline Method
- Visit any TIN Facilitation Centre (TIN-FC) with a completed Form 49B (available at TIN-FCs or online).
- Submit the form with cash payment for the fee.
Note: Companies typically don’t need to apply for a TAN since it’s already allotted to them during company registration. You can find this information in the company’s incorporation certificate.
When to Apply for TAN
If you’re required to deduct or collect taxes at source under sections 192 to 196D of the Income Tax Act, you must have a TAN. However, TAN is not required for tax deductions under Section 194IA (property transfers).
While you can apply for TAN at any time, the law requires you to submit the application within one month from the end of the month in which the tax was deducted or collected. If you don’t apply on time, you could be penalized with a fine of up to ₹10,000 under Section 272BB.
Where Should You Quote Your TAN?
You must quote your TAN in various tax-related documents, including:
- TDS/TCS challan payments
- TDS/TCS certificates
- Quarterly TDS/TCS returns
- Annual information returns
- Any other financial documents related to tax, including communications with the Income Tax Department
You can find the TAN of your employer or the person deducting tax in Form 16 or Form 16A. You can also check it online via Form 26AS.
What Happens if You Quote the Wrong TAN?
If you quote an incorrect TAN in any of your documents, you could face a fine of ₹10,000. Additionally, possessing more than one TAN is illegal. If you have multiple TANs, you must surrender the one you’re not using by submitting a change or correction form.
Can Different Branches Have Separate TANs?
Yes! If you run a business with multiple branches or divisions, you can apply for separate TANs for each one. However, the person responsible for tax deductions or collections at each branch must be clearly mentioned in the application form.
If you forget your TAN, you can retrieve it online from the Income Tax Department website.
If you need to correct any information related to your TAN (like an incorrect name or address), you can submit the Form for Change or Correction in TAN Data either online or at a TIN Facilitation Centre.
Conclusion
In summary, TAN is essential for anyone involved in tax deductions or collections. By following the steps outlined in this guide, you’ll be able to apply for your TAN, keep track of your application status, and stay compliant with tax laws.
Key Points to Remember:
- TAN is required for TDS and TCS purposes.
- TAN helps you avoid penalties by ensuring compliance with tax rules.
- You can apply online or offline, and there’s a small fee.
- Quote your TAN correctly in all relevant documents to avoid fines.
Now that you understand TAN, you’re ready to apply and get started with your tax-related responsibilities.
