TAN

TAN (Tax Deduction and Collection Account Number) is a 10-character alphanumeric identifier issued by the Income Tax Department under Section 203A of the Income Tax Act 1961 to every person or entity required to deduct or collect tax at source (TDS or TCS).

Structure:

• First 4 characters: alphabets (first 3 = location code, 4th = first letter of name of deductor).
• Next 5 characters: numeric.
• Last character: alphabet (check letter).

Example: `BLRA12345C` — issued in Bangalore.

Who needs TAN:

Every person required to deduct or collect tax at source — even individuals (in certain cases) — must obtain TAN. In practice:

• All companies, LLPs, partnerships, trusts, societies, AOPs, HUFs (subject to limits) carrying on business or employing staff.
• Individuals if their income from business / profession exceeds Section 44AB tax audit threshold, or if they are subject to specific TDS provisions (e.g., Section 194-IB for rent above thresholds, Section 194M for contractor / commission payments).

TAN vs PAN — the distinction:

• PAN identifies the entity as a taxpayer (income tax filing).
• TAN identifies the entity as a tax deductor / collector (filer of TDS returns).
• An entity has one PAN (Section 139A) but typically one TAN per branch if multiple TAN registrations are taken (though most centralise on one TAN).
• Section 206AA requires the deductee's PAN (failing which higher TDS); Section 203A requires the deductor's TAN (failing which the TDS return cannot be filed).

How to obtain:

• File Form 49B online via NSDL / Protean / UTIITSL.
• Fee: ₹65 (approx.) plus GST.
• Issued within 7–15 days.

When TAN is used:

• Mandatory on every TDS / TCS challan (ITNS 281).
• Mandatory on every TDS / TCS return (Form 24Q for salary, 26Q for non-salary residents, 27Q for non-residents, 27EQ for TCS).
• TDS certificates (Form 16, 16A) issued to deductees quote the deductor's TAN.

Penalty: Section 272BB — ₹10,000 for failure to apply for TAN or for quoting incorrect TAN.

For Indian startups: Apply for TAN immediately on incorporation (often via SPICe+ companion form INC-7 or separately). Required before the first salary payment (TDS u/s 192), the first vendor payment subject to TDS (194C / 194J), or any contractor / rent / commission payment.