Tax Deduction Account Number (TAN) or Tax Collection Account Number is a 10-digit alphanumeric 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).
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. Further, a person required to deduct tax under section 194-IB or section 194M shall not be required to obtain 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 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 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 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.
Consequences of not quoting TAN :
Section 272BB(1) provides for penalty for failure to obtain TAN and section 272BB(1A) provides for penalty for quoting incorrect TAN. Penalty imposable under section 272BB is Rs. 10,000.
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 deductor who has to deduct tax from different 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.
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.
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