Tax Deduction and Collection Account Number (TAN)
- Yogesh Suthar
- May 31, 2020
- 7 min read
This article discusses Meaning/ Structure/ Relevance of TAN, Persons liable to apply for TAN/ Consequences of not quoting TAN/ Procedure to obtain TAN/ MCQ.
Meaning of TAN
Tax Deduction Account Number or Tax Collection Account Number is a 10-digit alphanumeric number issued by the Income-tax Department (we will refer to it as TAN). TAN is to be obtained by all persons who are responsible for deducting tax at source (TDS) or who are required to collect tax at source (TCS).
Definition of TAN
(1) Every person deducting tax in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D section 194E, section 194EE, section 194F, section 194G, section 194H, section 194-I, section 194J and section 194K, 194L section 195, section 196A, section 196B, section 196C, and section 196D, if he has not been allotted any tax-deduction account number, shall, within such time as may be prescribed, apply to the Assessing Officer for the allotment of the tax-deduction account number.
(2) Where a tax-deduction account number has been allotted to a person, such person shall quote such number, -
(a) In all challans for the payment of any sum in accordance with the provisions of section 200;
(b) In all certificates issued in accordance with the provisions of section 203;
(c) In all the returns delivered in accordance with the provisions of sections 206, 206A and 206B to any income-tax authority; and
(d) In all other documents pertaining to such transactions as may be prescribed in the interests of revenue.
Structure of TAN
First 4 digits of TAN are alphabets, the next 5 digits of TAN are numeric and last digit is an alphabet.
First 3 alphabets of TAN represent the jurisdiction code, 4th alphabet is the initial of the name of the TAN holder who can be a company, firm, individual, etc.
For example, TAN allotted to Mr. Mahesh of Delhi may appear as under:
DEL M 12345 L
Who is liable to apply for TAN.
As discussed above, every person liable to deduct tax at source or collect tax at source is required to obtain TAN. However, a person required to deduct tax under section 194-IA can use PAN in place of TAN as such a person is not required to obtain TAN.
Further, a person required to deduct tax under section 194-IA can use PAN in place of TAN as such a person is not required to obtain TAN.
A person required to deduct tax under section 194-IB or section 194M shall not be required to obtain a tax deduction account number (TAN).
As per section 194-IB (as inserted by Finance Act, 2017), any individual or HUF [whose books of account are not required to be audited under section 44AB] is liable to deduct tax at the rate of 5% while making payment of rent of any land or building or both to a resident person if the amount of rent exceeds Rs. 50,000 for a month or part of a month.
Section 194M [inserted by Finance (No. 2) Act, 2019] provides for deduction of tax, at the rate of 5%, from the sum paid or credited to a resident, in a year on account of contractual work, commission (not being insurance commission as referred to in Section 194D), brokerage or professional fees, by an individual or a HUF [whose books of account are not required to be audited under Section 44AB], if the aggregate of such sum exceeds Rs. 50 lakhs in a year.
Relevance of TAN
As per section 203A of the Income-tax Act, 1961, every person who deducts or collects tax at source has to apply for the allotment of TAN. Section 203A also makes it mandatory to quote TAN in the following documents:
(a) TDS statements i.e. return
(b) TCS statements i.e. return
(c) Statement of financial transactions or reportable accounts
(d) Challans for payment of TDS/TCS
(e) TDS/TCS certificates
(f) Other documents as may be prescribed
The provisions relating to obtaining of TAN will not apply to a person deducting tax under section 194-IA (i.e. from sale consideration of land/building) and to such person, as may be notified by the Central Government in this behalf.
Documents Required for TAN Application
There is no need to attach any document with the application for allotment of TAN. But, when the application is being done through the online mode, the acknowledgment, which gets generated after filling up the form, will have to be forwarded to NSDL.
The acknowledgment duly signed, along with demand draft (if any) shall be sent to NSDL at the below address:
NSDL e-Governance Infrastructure Limited, 5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune - 411016
No separate TAN is required to obtain for the purpose of TCS
TAN allotted for TDS can be used for the purpose of TCS also. In other words, no separate TAN is required to obtain for the purpose of TCS, if the person already holds TAN for the purpose of TDS.
Single TAN is to be used in case of a deductor who has to deduct tax from different types of payment such as salary, interest payment, etc.
TAN once allotted can be used for all types of deduction and collection. In other words, it is not necessary to apply for different TAN if the deductor has to deduct tax from different types of payment such as salary, interest payment, etc.
Government deductors are also liable to obtain TAN
Like Non-Government deductors, the Government deductors are also required to apply for TAN.
PAN cannot be quoted in place of TAN
PAN should never be quoted in the field where TAN is required to be quoted. In other words, the deductor/collector cannot quote his PAN in place of TAN. If he does not possess TAN, then he has to apply for the same. However, a person required to deduct tax under section 194-IA can use PAN in place of TAN as such person is not required to obtain TAN.
A taxpayer cannot hold more than one TAN
It is illegal to possess or use more than one TAN. Different branches/ divisions of an entity may, however, have separate TAN.
In case more than one TAN have been allotted, then the TAN which is being used regularly should be continued and the other TAN(s) should immediately be surrendered for cancellation using “Form for changes or correction in TAN” which can be downloaded from NSDL-TIN website or may be procured from TIN-FC.
Consequences Of Not Quoting TAN
If the 10-digit alphanumeric TAN number is not quoted by eligible persons at requisite places, they can face the prospect of paying a penalty of Rs.10,000 under Section 272BB(1). If a wrong TAN is provided, the same penalty is imposed on the applicant under Section 272BB.
Apart from the above-mentioned points, if a TAN is not quoted in places where it is required, the following may also occur:
TDS or TCS returns are not accepted by TIN facilitation centers.
Banks to do not accept the challans for TDS/TCS payments
MCQ ON TAX DEDUCTION/COLLECTION ACCOUNT NUMBER
Q1. Tax Deduction Account Number or Tax Collection Account Number (TAN) is a_____ alpha-numeric number issued by the Income-tax Department.
(a) 5 digit
(b) 10 digit
(c) 15 digit
(d) 20 digit
Correct answer : (b)
Justification of correct answer: Tax Deduction Account Number or Tax Collection Account Number (TAN) is a 10-digit alpha-numeric number issued by the Income-tax Department.
Q2. As per section ________of the Income-tax Act, 1961, every person who deducts or collects tax at source has to apply for the allotment of TAN.
(a)203A
(b) 139A
(c) 203AA
(d) 210
Correct answer : (a)
Justification of correct answer:
As per section 203A of the Income-tax Act, 1961, every person who deducts or collects tax at source has to apply for the allotment of TAN. However, the provisions relating to obtaining of TAN will not apply to a person deducting tax under section 194-IA (i.e. from sale consideration of land/building) and to such person, as may be notified by the Central Government in this behalf.
Further, a person required to deduct tax under section 194-IB shall not be required to obtain a tax deduction account number (TAN).
As per section 194-IB (as inserted by Finance Act, 2017), any individual or HUF [whose books of account are not required to be audited under section 44AB] is liable to deduct tax at the rate of 5% while making payment of rent of any land or building or both to a resident person if the amount of rent exceeds Rs. 50,000 for a month or part of a month.
Section 194M [inserted by Finance (No. 2) Act, 2019] provides for deduction of tax, at the rate of 5%, from the sum paid or credited to a resident, in a year on account of contractual work, commission (not being insurance commission as referred to in Section 194D), brokerage or professional fees, by an individual or a HUF [whose books of account are not required to be audited under Section 44AB], if the aggregate of such sum exceeds Rs. 50 lakhs in a year.
Q3. First 3 alphabets of TAN represent the_________.
(a) Name of the TAN holder
(b) Surname of the TAN holder
(c) Jurisdiction code [As amended by Finance Act, 2020]
(d) Residential status of the TAN holder
Correct answer: (c)
Justification of correct answer:
The First 3 alphabets of TAN represent the jurisdiction code. Thus, option (c) is the correct option.
Q4. Which form is required to be filed in for applying for TAN?
(a) Form 49B
(b) Form 49C
Correct answer: (a)
Justification of correct answer:
Form 49B is required to be filed for applying for TAN. In case of an applicant, being a company, which has not been registered under the Companies Act, 2013, the application for allotment of Tax Deduction Account Number may be made in Form No. INC-32 (SPICe) specified under sub-section (1) of section 7 of the said Act for incorporation of the company.
Thus, option (a) is the correct option.
Q5. No penalty has been prescribed under the Income-tax Law for quoting incorrect Tax Deduction Account Number or Tax Collection Account Number (as the case may be)
(a) True
(b) False
Correct answer : (b)
Justification of correct answer:
Section 272BB(1A) provides for penalty for quoting incorrect Tax Deduction Account Number or Tax Collection Account Number (as the case may be). Thus, option (b) is the correct option.
Source- Income Tax Act, Rules and http://www.incometaxindia.gov.in/Also Read: (Click the link below)
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