You may argue that having a PAN card is sufficient to submit proof of tax liabilities. However, different types of people and taxpayers must obtain various documents to submit their tax audits. TAN is one component of it. Did you know that quoting the TAN number for all Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) returns is mandatory under Section 203A of the Income Tax Act, 1961?
The TAN full form is Tax Deduction and Collection Account Number, a unique 10-digit number the Indian government authorises to identify an entity for deducting TDS or TCS. The Income Tax Department uses this number to track and confirm the tax payments.
What is TAN?
TAN (full form - Tax Deduction and Collection Account Number) is a 10-digit alphanumeric number that every individual or business liable to deduct TCS or TDS must obtain. If you pay any salary or commission to anyone, you must deduct their tax at source and mention it in your TDS returns, payments, and other communication with the Income Tax Department.
As per Section 203A of the Income Tax Act 1961, it is compulsory for all TDS and TCS deductors to quote their TAN number in all their statements and communications with the IT department. Failure to do so attracts a penalty, and banks will not accept TDS returns and payments if they don't have the TAN number.
Benefits of Having a Valid TAN for Businesses and Individuals
Having a valid TAN number provides several benefits to businesses and individuals. Let’s talk about a few:
Mandatory requirement
TAN number is a mandatory requirement that every entity must quote for paying salaries, interest, or dividends. They must quote their TAN in challans, returns, and certificates. The TAN automatically captures the person’s complete address and recorded PIN to authenticate the transactions. So, having a TAN makes you a legal entity to carry out the deductions.
Timely processing of TDS and TCS returns
Every entity must provide its unique 10-digit TAN number while filing ITR returns and TDS or TCS statements. It allows the Income Tax Department to verify the details quickly and process the tax deductions or refunds faster.
Online application and tracking
You can apply for TAN online and track its status using an acknowledgement number. After filing the returns and statements, you can also track the status using your TAN number.
Easy compliance
Having a TAN code is a mandatory requirement. It gives you the legal authority to deduct TDS and TCS while complying with the latest guidelines.
Also Read: Guide to e-Filing or Online Filing your Income Tax Returns
Eligibility Criteria for TAN Application
TAN is a mandatory requirement for all parties, organisations, and NRIs involved in transactions that require submitting TDS proof to the Income Tax Department. A TAN will be compulsory if the payable amount is more than Rs 50,000 a month. Since quoting TAN on all TCS and TDS returns is mandatory, every entity that deducts TDS or TCS according to the Income Tax Act, 1961 must obtain TAN.
TDS is a tax collection system at the income source. The responsibility for tax deduction lies with the entity making the payment. Similarly, TCS is the type of tax a seller must collect from the buyer at the time of sale. Therefore, every business, individual, government agency or organisation deducting TCS or TDS is eligible for TAN application. Failure to do that will result in legal action and penalties.
Besides that, Section 194M of the Income Tax Act 1951 allows a yearly TDS deduction of 5% for contractual work. Moreover, taxes on brokerage and commission are deductible if the principal amount is more than Rs 50 Lakh.
TAN Application Process
TIN, or Tax Information Network, is responsible for allotting TAN numbers on behalf of the Income Tax Department. You may apply for a TAN number both online and offline by following these steps:
Online Application Procedure
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Visit the official NSDL-TIN website at https://tin.tin.nsdl.com/tan/index.html.
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Select ‘Online application for TAN (Form 49B)’.
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Reach the ‘Apply for new TAN’ option and select the ‘deductors’ category.
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Fill out the Form 49B carefully while avoiding any errors.
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Click on ‘Submit’.
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Pay the applicable fee online or via cheque or DD at Mumbai in favour of NSDL-TIN or using a credit or debit card.
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You will receive a 14-digit acknowledgement number you can use to track your TAN application status online.
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Print the document and send it to the following address after signing it: NSDL e-Governance Infrastructure Limited, 5th Floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune – 411016.
Offline Application Procedure
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Visit your nearest TIN Facilitation Centre.
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Obtain Form 98 or download the form from the Income Tax Department’s website.
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Unregistered companies must fill out Form INC-7 under the Companies Act.
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Submit the form with the fee in cash, cheque or DD at the TIN counter.
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Track the TAN application status by calling 020-27218080 or sending a text message ‘NSDLTAN’ to 57575.
The Income Tax Department will require several documents to evaluate your TAN application, including your identity and address proofs such as passport, driving license, PAN card, voter ID, etc.
Conclusion
TAN number is a crucial identity number every business entity must possess to file tax returns. The Indian government makes it mandatory for all sizes of businesses to apply for TAN. Under Section 203A of the Income Tax Act 1961, every company must deduct TDS or TCS at source to streamline the taxation system. They will require a TAN number to declare the amount they deducted in a year while filing their IT returns.
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Frequently Asked Questions
1. What is the TAN number?
A TAN number is a 10-digit code that every person collecting TCS or TDS must obtain. Under Section 203A of the IT Act 1961, the service provider must quote their TAN number on all IT returns and TDS and TCS statements.
2. How do I find my TAN number?
To find your TAN number, log on to the official website of the IT Department, click on ‘Know Your TAN’, provide the requested details, enter an OTP, and ‘Validate’ to see your TAN details on the screen.
3. What is TAN number of employees?
Employees don't have a TAN number. They have a PAN number that keeps a record of their salary credits and other financial transactions.
4. Why is the TAN number important?
TAN number is imperative to file your tax returns, TCS and TDS statements, or collect various income tax-related forms.
