Overview

Tax Deduction and Collection Account Number (TAN) is a unique 10-digit alphanumeric identifier issued by the Income Tax Department of India. TAN is mandatory for entities responsible for deducting or collecting tax at source (TDS/TCS) on behalf of the Income Tax Department. TAN registration enables businesses and individuals to comply with TDS regulations, file TDS returns, and avoid penalties for non-compliance. It is essential for employers, companies, and other entities engaged in specified transactions requiring tax deductions.

Overview

Tax Deduction and Collection Account Number (TAN) is a unique 10-digit alphanumeric identifier issued by the Income Tax Department of India. TAN is mandatory for entities responsible for deducting or collecting tax at source (TDS/TCS) on behalf of the Income Tax Department. TAN registration enables businesses and individuals to comply with TDS regulations, file TDS returns, and avoid penalties for non-compliance. It is essential for employers, companies, and other entities engaged in specified transactions requiring tax deductions.

Benefits

  1. Legal Compliance: TAN registration ensures that businesses comply with TDS requirements, reducing the risk of penalties.
  2. Simplifies Tax Deduction and Collection: TAN provides a standardized way for businesses to deduct or collect tax on payments and remit it to the government.
  3. Required for TDS Filings: TAN is mandatory for filing TDS/TCS returns, generating TDS certificates, and tracking TDS payments.
  4. Credibility and Transparency: Businesses with TAN registration maintain transparency in tax deductions, enhancing credibility with employees and other stakeholders.
  5. Avoidance of Penalties: TAN holders can avoid penalties imposed on non-registered entities and ensure proper compliance with tax laws.

The documentation requirements for TAN registration are minimal. The applicant needs to provide basic information about the entity or individual applying for TAN, which includes:

Application Form: Form 49B, which is specifically for TAN registration.

Proof of Identity and Address:

  1. PAN card of the applicant (business or individual).
  2. Certificate of Incorporation or registration documents for companies or firms.

Additional Documents for Specific Entities:

  1. Partnership Deed for partnerships.
  2. Trust Deed for trusts.
  3. MOA and AOA for companies (if applicable).

Power of Attorney or Board Resolution (if the application is submitted by an authorized representative).

Monthly or Quarterly TDS Deposits:
TAN holders must deposit TDS amounts deducted from payments monthly or quarterly, depending on the type of transaction. TDS payments are made through Challan ITNS 281.

  1. Filing TDS Returns: TAN holders must file TDS returns quarterly. The forms include:
    Form 24Q: For TDS on salaries.
  2. Form 26Q: For TDS on all payments other than salaries.
  3. Form 27Q: For TDS on payments made to non-residents.

Issuance of TDS Certificates: TDS certificates must be issued to the recipients of payments, as proof of tax deducted. Common TDS certificates include:

  1. Form 16: Certificate for TDS on salaries, issued annually.
  2. Form 16A: Certificate for TDS on other payments, issued quarterly.

Annual Reconciliation:
Businesses must reconcile the TDS returns filed with the annual financial statements to ensure accuracy in tax reporting.

Compliance with TCS Requirements (if applicable):
TAN holders who are liable to collect tax at source (TCS) must also comply with TCS deposit and reporting requirements.

Record Maintenance:
Maintain detailed records of TDS transactions, including the amount deducted, deposited, and TDS certificates issued. Records must be retained for at least 8 years.

Penalties for Non-Compliance

  1. Penalty for Failure to Obtain TAN: Non-registration for TAN attracts a penalty of ₹10,000 under Section 272BB of the Income Tax Act.
  2. Interest on Late TDS Deposits: Failure to deposit TDS on time results in an interest charge of 1.5% per month on the TDS amount until payment.
  3. Late Filing Fee: Delayed filing of TDS returns attracts a fee of ₹200 per day, up to the total TDS amount.
  4. Penalty for Incorrect TDS Return Filing: Filing inaccurate TDS returns can lead to a penalty of up to ₹1 lakh.
  5. Non-Issuance of TDS Certificates: Failure to issue TDS certificates on time results in a penalty of ₹100 per day for each certificate not issued.

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