A Tax Collection Account Number, commonly known as TAN, is a ten-digit unique number provided in India to individuals who remain bound by the Indian Income Tax Act of 1961 to reduce or collect the taxes on the amount paid by them.

The tax deducted at source or indirect taxes of India on cash payments by assessments gets placed under TAN. This allows assessing who obtained the funds to claim the tax deducted at source in their overall revenue for their yearly tax returns. 

The Indian Income Tax Law requires using a designated form (Form 49B) to apply for TAN if you have an MSME registration, and you can fill out a form on the NSDL portal. In addition, the Government of India has designated NSDL (National Securities Depositories Ltd ) as the middleman for the TAN registration. 

Also, during the application procedure, no paperwork other than proof of identity and proof of address is a must. Moreover, when applying for a TAN, you must submit the printed confirmation received and address documents to NSDL.

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Any Tax Deductions at Source (TDS) or Tax Collection at Source (TCS) documents and certificates, as well as all TDS or TCS challans and credentials, must include the TAN. 

If the TAN is not specified on a TDS or TCS challan, document, or return, banks or similar institutions may refuse to accept it. The Indian Income Tax Law of India imposes a penalty of Rs. 10,000 if you forget to get a TAN or do not include it on the relevant returns, challans, or certifications even when you own a Udyog Aadhar. 

The TAN has the following format: 

  • The first four characters are alphabetical, the five words are numerical characters, and the final letter remains an alphabet. ABCD12345E is an example. 
  • The town or state where you get a TAN gets represented by the first three characters. Also, the initial character of the deductor’s name gets expressed by the fourth character. 
  • The next five characters are numerical, accompanied by an alphabetic symbol. 
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TAN and non-resident

When a non-resident Indian sells his home to a registered Indian, the TAN becomes relevant. The buyer must check to see if the non-resident has a PAN. If the non-resident does not have a PAN, they will need to apply for one. 

Any property transaction over Rs. 5 million now earns a 1% tax exemption at source, thanks to recent amendments in the income tax law. The buyer must reduce 1% of the estate’s worth and register it with the Indian government.

When submitting the tax deducted at the source, the buyer’s TAN- must be mentioned. If the estate is getting acquired from a citizen, the TAN claim is not required. However, if you bought the property from a non-resident, you will need the TAN. 

Following the transfer of ownership, the buyer must provide the seller with a document of the tax break, filled under form 16A. A non-resident can also purchase real estate from another non-resident. In this circumstance, the demand for TAN becomes significant.

The non-resident buyer will have to subtract TDS and submit it to the Indian government. Also, this happens because the transaction must be carried out in Indian rupees and cannot get carried out in a foreign exchange equivalent. In this situation, the buyer will have to transfer funds from one Indian rupee bank to another, necessitating using a TAN.

If a non-resident purchases land from a citizen, the TDS regulations apply again. Also, when a non-resident acquires property from a resident, the transactions must get settled in Indian rupees. Moreover, the tax exemption regulations, as well as the resulting TAN, must be followed systematically.

TAN’s significance for organisations

A TAN number is a significant identifier for businesses to submit tax returns. The Government of India requires all companies, regardless of size, to apply for a TAN number.

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You can understand the significance of TAN by the fact that all businesses are bound to deduct tax at source (TDS) for payments made to suppliers, vendors, employees, or contractors that exceed a particular threshold.

For different modes of payment, there are varying limits. A TDS deduction is crucial for rent above Rs 1,80,000 or an expert charge exceeding Rs 30,000. In these circumstances, companies using these services are vital for subtracting tax at the source, which necessitates using a TAN number.

Who is eligible to apply for TAN?

As previously stated, every individual who remains bound to withhold or receive tax collection at the source (TCS) remains eligible to receive a TAN.

An individual required to withhold tax under section 194-IA, on the other hand, can utilise PAN instead of TAN because they do not need to obtain a TAN. Furthermore, a person who’s obligated to deduct tax under sections 194-IB or 194M is not required to get a tax deduction account number (TAN).

If the amount of income paid to a resident person exceeds Rs. 50,000 for a month or portion of a month, they have to apply for TAN. Section 194 M allows a person or a HUF [whose financial records are not required to get evaluated under Section 44AB] to subtract tax at a rate of 5% from the amount paid or attributed to a citizen in a year on consideration of contractual work.

Commission (not being healthcare commission as defined in Section 194D), broking or professional fees if the total amount paid or credited to a resident exceeds Rs 50 lakhs.

It is against the law to have or use more than one TAN. Different branch offices of an entity, on the other hand, may have their own TAN. If any company took more than one TAN, the one used frequently gets accepted, and others terminate. 

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Frequently Asked Questions

What is TAN full form?

Tax Deduction Account Number or Tax Collection Account Number is a 10 -digit alpha-numeric number issued by the Income-tax Department. 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).

What is the use of TAN?

The primary purpose of the Tax Deduction and Collection Account Number, commonly known as TAN, is related to deduction or collection of tax at source. Under Section 203A of the Income Tax Act, obtaining TAN is compulsory for individuals or businesses who are mandated by the government to deduct or collect tax.

Who is having 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).

How can I get TAN No?

Here is how to apply for TAN?
1) Visit www.tin-nsdl.com/index.html
2) Select ‘TAN’ under the ‘Services’ dropdown
3) Click on ‘Apply Online’
4) Select ‘New TAN’
5) On the new page, choose from the list ‘category of deductors’ and click on ‘Select’
6) In doing so, you are redirected to Form 49B
7) Fill in the form and click ‘Submit’

What is a TAN and TIN?

Both TAN and TIN are tax identification numbers. The Income Tax Department of India allocates the Tax Deduction and Collection Account Number (TAN), while the Commercial Tax Department of the applicant’s state allocates the Taxpayer Identification Number (TIN).

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