In India, the Tax Deduction and Collection Account Number (or TAN, as it is popularly known) is used for deducting taxes at the source.
The number is a ten-digit alpha-numeric string with the structure “ABCD12345F”. The first three letters represent the city or state in which the TAN is registered. The fourth letter is the first letter of the deductor’s name. This is followed by five numbers and a random letter at the end.
For example, Mr. Rakesh Jain, whose BPO firm is registered in Bangalore, would have a TAN number of BLRR12345E (example).
Common Uses of TAN
- The TAN number is a mandatory part of TDS and TCS returns filed with income tax authorities.
- It is also compulsory for payment challan/invoice, and any certificates issued (such as Form 16 or 16A to employees).
- The TAN is used for a variety of TDS deductions like salary, dividends, and interest earned.
Purpose of TAN
For several types of payments, the government requires withholding tax to be deducted at the source.
The payer has an obligation to subtract a certain amount of tax as prescribed by income tax rules and deposit it with the government.
The payee is issued a deduction certificate at the end of the financial year by the payer about the amount subtracted and deposited, including the date of deposit and bank challan/invoice number.
The payee would file his income tax returns, quote the amount already subtracted as tax, and ask for adjustment as required.
An example would clarify it.
Such as, Mr. Rakesh Jain has an employee, Surinder Singh, to whom he pays a yearly salary of ₹ 4,80,000.
At the start of Financial Year 2019-20, Mr. Jain estimated that his employee would earn ₹ 4,80,000 in that year. The rules state that 5% of the salary amount exceeding ₹ 2,50,000 has to be subtracted within the income bracket of ₹ 2,50,000 – 5,00,000.
As per rules, he subtracts 5% of employee income exceeding ₹ 2,50,000. As such, 4,80,000 minus 2,50,000 equals 2,30,000, and 5% of 2,30,000 is 11,500.
At the end of FY 2019-20, he issues Form 16 to Surinder, stating that he has deducted ₹ 11,500, and that amount has been deposited by TAN BLR12345E, which would be used by Surinder to claim tax credits if applicable.
The Tax deduction and Collection Account Number was used to subtract from Surinder’s salary, issue a certificate to Surinder, and lastly, used by Surinder to claim tax adjustments.
It is similar for bank interest, dividends, rent, and other withholding tax situations, except that the certificate name changes slightly.
Who needs TAN?
If you are required to deduct tax at the source, you need a TAN number. This includes the payment of salary, dividends, and interest. For withholding tax on rent above ₹ 2,40,000, a TAN used to be required, but the rule has been modified. It can now be cleared using Form 26QC at NSDL e-Gov-TIN website.
How to Apply For TAN
You can apply online at the NSDL e-Gov-TIN website or at TIN facilitation centers.
- Log in to the official website.
- Select Services > New TAN.
- Select “Category of the Deductor”.
- You would be redirected to Form 49B.
- Fill in the details and submit.
- You would be provided a 14-digit acknowledgment number.
Obtain a printout and send with photocopies of supporting documents to the following address:
NSDL e-Governance Infrastructure Limited
5th floor, Mantri Sterling
Plot No. 341, Survey No. 997/8
Near Deep Bungalow Chowk
Pune – 411016
After a few days, you will receive your TAN number by email and a TAN card by mail.
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