Tax deduction and collection account number

PAN stands for Permanent Account Number, and TAN stands for Tax Deduction and Collection Account Number. PAN is a unique 10-digit alphanumeric number that is allotted to individuals, companies, and other entities by the Income Tax Department of India. In contrast, TAN is a 10-digit alphanumeric number allotted to persons who are required to deduct or collect tax on behalf of the government.

What is the meaning of TAN?

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.

TAN number full form:- Tax Deduction and Collection Account Number.

TAN stands for Tax Deduction and Collection Account Number. It is a 10-digit alphanumeric number allotted by the Income Tax Department of India to persons who are required to deduct or collect tax on behalf of the government.

TAN is mandatory for persons responsible for deducting tax at source (TDS) on salaries, interest, dividends, and other payments as specified by the Income Tax Department. TAN is also required for persons responsible for collecting tax at source (TCS) on certain transactions as specified by the government.

TAN is a unique identifier that helps track and monitor tax deductions and collections made by the person. It is used for filing TDS/TCS returns, issuing TDS/TCS certificates, and making payments towards TDS/TCS liabilities.

TAN can be obtained by applying Form 49B to any of the authorized TIN (Tax Information Network) facilitation centers or NSDL (National Securities Depository Limited) e-Gov TIN-FCs. Once the application is processed, TAN is allotted and communicated to the applicant by the Income Tax Department.

TAN Number - 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.

If a certain Mr Mahesh from Rajasthan files tax returns at source, his TAN number will look like – RAJM99999B

Where,

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.

When a certain Delhi-based firm, XYZ Pvt Ltd, is allotted a TAN, it may look like this – DELX12345M

Here again,

‘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.

The 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.

Who are eligible to apply for the TAN?

As per the Indian Income Tax laws, any person who is responsible for deducting tax at source (TDS) or collecting tax at source (TCS) is required to apply for a Tax Deduction and Collection Account Number (TAN).

The following are some of the entities that are required to apply for TAN:

Government organizations or departments are required to deduct TDS or collect TCS.
Companies or corporate entities, including public and private limited companies, who are required to deduct TDS or collect TCS.
Partnerships, limited liability partnerships (LLPs), and trusts that are required to deduct TDS or collect TCS.
Individuals or firms who are carrying out business and liable to deduct TDS under the provisions of the Income Tax Act.

How to apply for TAN?

There are two modes for applying for TAN: online and offline.

You can apply for a Tax Deduction and Collection Account Number (TAN) in India by following these steps:

Visit the NSDL website or TIN-FC website and download Form 49B.
Fill in the form with accurate details and attach the necessary documents, such as proof of identity and address.
Pay the required processing fee,
Submit the form and the supporting documents to any of the authorized TIN facilitation centers or NSDL e-Governance TIN-FCs.
Once the form and documents are verified, TAN will be allotted and communicated to the applicant.

For offline applications, one should file Form 49B in duplicate and submit it to any TIN Facilitation Centres (TIN-FC). Addresses of TIN-FCs are available at the NSDL-TIN website (https://www.tin-nsdl.com).

What is the importance of the TAN number?

Legal Compliance: As per the provisions of the Income Tax Act, 1961, it is mandatory for anyone responsible for deducting or collecting tax at source to obtain a TAN number. Failure to obtain a TAN number or quoting an incorrect TAN number can result in penalties and legal consequences.
Tax Deduction and Collection: The TAN number is used to identify the person or entity who has deducted or collected tax at the source and credited the amount to the government’s account. The TAN number is also used to issue TDS certificates to the person from whom tax has been deducted.
Payment of Taxes: A TAN number is necessary to pay taxes online. It is also required for the e-filing of TDS returns.
Avoidance of Fraud: A TAN number helps reduce fraud related to TDS deductions and collections. It ensures that tax is being deducted and collected only by authorized persons or entities.

FAQs

Is filling the TAN section on TDS/TCS/ AIR slips mandatory?

Yes, it is mandatory to mention the TAN number on these documents; otherwise, the request will not be accepted, and the documents would return.

How is TAN different from PAN?

TAN is a unique identification number allotted to persons who are deducting or collecting tax at source. PAN is a unique number allotted to assessees like individuals, companies, etc., for financial transactions, income tax returns, etc.

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