TAN – Tax Deduction and Collection Account Number

When it comes to tax compliance in India, one of the most important requirements for individuals and organizations deducting or collecting tax at source is obtaining a TAN (Tax Deduction and Collection Account Number). This 10-digit alphanumeric number is issued by the Income Tax Department and is compulsory for anyone responsible for deducting TDS (Tax Deducted at Source) or collecting TCS (Tax Collected at Source) on behalf of the government.

Whether you're running a business, managing payroll, or working as an accountant handling company finances, having a valid TAN ensures that your tax deduction activities are recognized, legal, and properly recorded with the authorities.

What is TAN?

TAN stands for Tax Deduction and Collection Account Number. It is used to track and manage all TDS/TCS payments made by a deductor. Every payment that involves tax deduction or collection at source must be associated with a TAN so that the Income Tax Department can match it against the deductee’s PAN and credit the tax amount to the correct account.

It is important to understand that TAN is not the same as PAN. While PAN is used to identify taxpayers, TAN is specifically for those who deduct or collect tax and deposit it with the government.

Who Needs TAN?

If you’re deducting TDS on any type of payment such as salary, rent, professional fees, contract work, interest, or commission, you are legally required to apply for TAN. Similarly, businesses involved in collecting tax at source under specified categories must also obtain a TAN.

The following entities are required to obtain TAN:

• Companies and organizations making payments with TDS obligations.
• Employers deducting TDS from employees’ salaries.
• Individuals or firms paying rent exceeding the threshold limit.
• E-commerce operators responsible for TDS under Section 194-O.
• Sellers liable to collect TCS on certain transactions.

Government departments, banks, educational institutions, and even startups may require TAN if they are making payments that fall under TDS/TCS rules.

Structure of TAN

TAN is a unique combination of letters and numbers in this format: ABCD12345E

• The first three letters represent the jurisdiction code.
• The fourth letter is the initial of the name of the deductor.
• The next five characters are numerical digits.
• The last character is an alphabetic check digit.

Each TAN is unique to the deductor and is used for all TDS/TCS-related transactions under that entity.

How to Apply for TAN

Applying for a TAN is a simple and straightforward process. You can choose to apply either online or offline, depending on your preference.

1. Online Method:

• Visit the NSDL website
• Select ‘TAN’ and choose ‘Apply Online’.
• Fill Form 49B with your details such as name, address, contact information, and nature of payment.
• Submit the form and pay the processing fee online.
• Once submitted, you’ll receive an acknowledgment number.
• Your TAN will be processed and sent to your registered address.

2. Offline Method:

• Download and print Form 49B.
• Fill it manually and submit it to a TIN Facilitation Centre.
• Pay the application fee by cheque, demand draft, or other accepted methods.
• After processing, your TAN will be dispatched by post.

Penalty for Non-Compliance

Failing to apply for TAN when required, or quoting an incorrect TAN in documents, can lead to penalties under Section 272BB of the Income Tax Act. The penalty amount can be up to ₹10,000. Moreover, without TAN, you cannot file TDS returns, which may result in additional interest and late fees for non-compliance.

Where to Mention TAN?

Once you receive your TAN, you must quote it in all TDS and TCS-related documents, such as:

TDS returns (Form 24Q, 26Q, etc.)

Payment challans (Form 281)

TDS certificates (Form 16, 16A)

Annual Information Statements

Correspondence with the Income Tax Department