TAN REGISTRATION IN INDIA
In India, every person or entity responsible for deducting or collecting tax at source must obtain a Tax Deduction and Collection Account Number (TAN). Issued by the Income Tax Department, TAN serves as a unique 10-digit alphanumeric identifier for entities that handle Tax Deducted at Source (TDS) or Tax Collected at Source (TCS).
It is mandatory to quote TAN in all TDS/TCS returns, challans, and certificates. Failure to do so may lead to penalties and non-compliance with the Income Tax Act, 1961.
WHAT IS A TAN?
TAN, or Tax Deduction and Collection Account Number, is a 10-character alphanumeric code issued under Section 203A of the Income Tax Act, 1961. It helps the government track and reconcile all TDS and TCS activities performed by businesses or individuals.
STRUCTURE OF TAN NUMBER
The TAN is designed with a specific pattern:
· First three characters (alphabetic): Represent the jurisdiction code of the issuing region.
· Fourth character (alphabetic): Indicates the initial letter of the entity or individual’s name.
· Next five characters (numeric): A unique system-generated number.
· Last character (alphabetic): A system-generated check letter.
Example: DELM12345B
WHO MUST OBTAIN TAN REGISTRATION?
TAN registration is mandatory for:
- Businesses or organizations that deduct TDS on salaries, contractor payments, rent (above ₹1,80,000 per year), professional fees, or other specified payments.
- Branches of companies handling payments liable for TDS/TCS.
- Non-profit organizations making payments exceeding prescribed limits.
- Proprietors and partnership firms liable to deduct or collect tax at source.
Note: Salaried individuals not required to deduct tax at source are exempt from TAN registration.
IMPORTANCE OF TAN REGISTRATION
TAN registration ensures seamless compliance with tax laws and accurate tracking of deductions. Under Section 203A, quoting the TAN is mandatory in:
- TDS/TCS returns and statements.
- Challans for TDS/TCS payments.
- TDS/TCS certificates issued to deductees.
- Any correspondence with the Income Tax Department.
Without a valid TAN, an entity cannot deposit TDS/TCS and may incur penalties.
KEY FEATURES OF TAN REGISTRATION
i. Lifetime Validity: Once allotted, a TAN remains valid for life and does not require renewal.
ii. Mandatory for TDS/TCS Payments: Banks will not accept TDS payments without quoting a valid TAN.
iii. Applicable to All Business Types: Includes companies, LLPs, partnerships, proprietors, and NGOs.
iv. Unique Identification: The 10-digit TAN distinctly identifies each tax deductor/collector across India.
v. Essential for Compliance: Ensures transparency and accuracy in tax deduction and remittance processes.
BENEFITS OF TAN REGISTRATION
· Legal Compliance: Prevents penalties and ensures smooth tax operations.
· Efficient Record-Keeping: Simplifies tracking and reconciliation of TDS/TCS transactions.
· Streamlined Processes: Facilitates timely deductions and deposits of tax.
· Improved Credibility: Demonstrates adherence to regulatory and financial norms.
· Ease of Monitoring: Enables businesses to easily access TDS statements and certificates.
MANDATORY PAN LINKAGE
While applying for a TAN, quoting a valid Permanent Account Number (PAN) is mandatory. PAN serves as an identification reference linking all tax deduction and collection activities. If the applicant does not possess a PAN, it should be obtained before or along with TAN registration.
PENALTY FOR NON-COMPLIANCE
Failure to apply for TAN or quoting an incorrect TAN in TDS/TCS documents attracts a penalty of ₹10,000 under Section 272BB of the Income Tax Act. Therefore, obtaining and maintaining a valid TAN is essential for all entities responsible for deducting or collecting tax.