What is the full form of TAN in Income Tax?
The TAN Full Form in Income Tax is Tax Deduction and Collection Account Number. The Indian Income Tax system is based on the concept of deductors and collectors who withhold taxes at source-TDS/TCS-on various transactions. The Income Tax Department (ITD) issues a unique identifier, referred to as the Tax Deduction and Collection Account Number or TAN, to smooth this process and provide a reliable record of the same. This article throws light on the nuances and finer aspects of TANs, from what they are to who requires one and why; it meets the crucial information that needs to be followed.
What is a TAN?
Organizations that deduct or collect tax at source get 10-digit alphanumeric TANs from the ITD. With this unique deductors/collectors identification, the ITD can easily monitor TDS/TCS activity.
Who Needs TAN?
Not everyone needs TAN. TANs are required by businesses that deduct TDS on wages, rent, and professional fees. Non-companies must provide TANs for TDS on contractor payments under the Income Tax Act, 1961. Deduct/collect HUFs require TANs. TDS-deducting local governments need TANs.
Exceptions:
PAN may replace TAN for TDS deductions in Sections 194IA (immovable property transactions), 194IB (taxable bond redemptions), and 194M (mutual fund sales).
TAN significance
TDS/TCS compliance requires TANs. The ITD mandates you to include your TAN on TDS/TCS statements, refund forms, deposit challans, deductee certificates, and other documents. Missing or improperly mentioning a TAN might result in a Rs. 10,000 fine. Your TDS/TCS returns may be disallowed without a TAN.