Meaning of TAN
Tax Deduction Account Number or Tax Collection Account Number is a 10-digit alpha-numeric number issued by the Income-tax Department (we will refer to it as TAN-Tax Account Number). 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).
PERSON RESPONSIBLE TO deduct tax
All person / entities as a payee (I.e, individual, HUF ,partnership Firm, LLP, society, trust , NGO, ,association, Company etc.) are required to deduct tax at source before the making certain payment or crediting the expenses like salary, interest, payment to professional, Commission, advertisement, payments to contractor or sub-contractors, payment of rent etc.
Persons liable to apply for TAN
As discussed above, every person(entity) liable to deduct tax at source or collect tax at source is required to obtain TAN..
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
.
Consequence of non deducting or not depositing TDS
· Disallowance of expenditure at 100% and 30% under section 40(a)(i) and section 40(a)(ia) respectively. I e these expense shall not be counted as deduction from profit or income.
· In NGO case, the expense on which TDS have not been deducted, such expenses are not liable to claim exemption under income tax.
· 201(1A) lays down that such person shall be liable to pay simple interest at rate at 1% or 1.5% (as applicable) for every month or
· Levy of interest under Section 221
· Levy of Penalty under section 271C for TDS non-deduction or non-payment
(To avoid such consequences, the responsible person (entities) must apply to obtain TAN).
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
Documents to be submitted along with TAN application
(Some basis information are required which is given in separate checklist.)
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 types 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.
Government deductors are also liable to obtain TAN
Like Non-Government deductors, the Government deductors are also required to apply for TAN.
PAN cannot be quoted in place of TAN
PAN should never be quoted in the field where TAN is required to be quoted. In other words, the deductor/collector cannot quote his PAN in place of TAN. If he does not possess TAN, then he has to apply for the same. 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.
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.
Changes in the basic data communicated at the time of making the application for allotment of TAN
Any change or correction in the data associated with TAN should be communicated to the Income-tax Department .
For any query and professional assistance, Please connect at SRTConsultancy & Co at sandeeprawatca@gmail.com
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