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What Is TAN?

Published on Jul 11, 2024Updated on Feb 6, 2025

What Is TAN?

Ever wondered what is TAN exactly? Short for Tax Deduction and Collection Account Number, it is a 10-digit alphanumeric identifier issued by the Income Tax Department to individuals or organisations responsible for deducting or collecting tax at source, as per the Income Tax Act, 1961. TAN includes four letters, followed by five numerals, and ends with a final letter. It must be quoted on all TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) returns, payment challans, and certificates issued by the deductor.

Who Needs TAN?

Individuals or organisations that are required to deduct or collect tax at source as mandated by the Income Tax Act of 1961 need to apply for TAN registration. This includes employers who deduct tax from employee salaries, financial institutions that deduct tax on interest earned, and entities making payments to contractors, professionals, and rent where tax deduction at source is applicable. Companies, partnership firms, sole proprietorships, trusts, and government agencies involved in transactions requiring TDS or TCS must also obtain a TAN. It is mandatory for these entities to quote their TAN on all TDS/TCS returns, payment challans, certificates, or other documents as may be prescribed in communications with the ITD.

However, individuals required to deduct TDS under specific sections like 194-IA (sale of immovable property), 194-IB (rent exceeding INR 50,000 per month), or 194M (payment to resident contractors or professionals) may quote their PAN (Permanent Account Number) instead of a TAN.

Applying for TAN

Applying for a TAN ensures strict compliance with tax regulations and helps avoid penalties under the Income Tax Act. You have the option to apply for a TAN through either an online or offline process. For online applications, visit the TIN-NSDL website. For offline applications, visit a TIN (Tax Information Network) facilitation centre.

Applying for TAN Offline:

  1. Applying for a TAN offline involves visiting a TIN facilitation centre, where you can obtain Form 49B. You can also download it from the TIN-NSDL website. After completing the form, it should be submitted along with the application fee directly at the facilitation centre. Upon submission, applicants will receive an acknowledgement receipt confirming their TAN application. 
  2. If the applicant seeking a TAN is a company not registered under the Companies Act, 2013, the TAN application must be submitted using SPICe (Simplified Proforma for Incorporating Company electronically), or form INC-32. This form can also be downloaded from the ITD website or obtained from a nearby TIN facilitation centre. 
  3. If the TAN holder’s address changes to a city under a different regional computer centre of the ITD, a new TAN application using Form 49B is required.

Applying for TAN Online:

  1. Fill out the application: Visit the official TIN-NSDL website and navigate to the 'TAN Application' section. Complete Form 49B with the necessary details, including the deductor’s name, address, type of deductor, and relevant information. 
  2. Pay the fees: Submit the form online and pay the application fee through available payment methods, which include demand draft, cheque, credit card, debit card, or net banking. The fee for the TAN application is INR 77 (INR 65 application charge + 18.00% Goods & Services Tax), with effect from July 2023.
  3. Download the acknowledgement receipt: Upon submission, you will receive an acknowledgement screen displaying a unique 14-digit acknowledgement number, application status, applicant’s name, contact information, payment details, and signature space (you must sign within each designated box on the acknowledgement). Download and keep this receipt for future reference.

What Are the Documents Required for TAN?

You are not required to submit any documents with your TAN application. However, if you have applied online, you must sign the acknowledgement generated online and send it to NSDL (National Securities Depository Limited).

What if I Have Two TANs?

If you have two TANs, it is important to address this issue quickly due to the implications under the ITD. Possessing more than one TAN is not permissible and therefore illegal, except in cases where different branches or divisions of an organisation require separate TANs. Surrender any additional TANs for cancellation using the ‘Form for Changes or Correction in TAN’. This form can be obtained from the nearest TIN facilitation centre or downloaded from the TIN-NSDL website. Typically, the TAN you use regularly or the one associated with the head office or main branch should be retained.

When Can I Get TAN Cancelled?

You should consider cancelling your TAN in the following situations:

  • If you possess multiple TANs
  • If you no longer need TAN for the deduction of TDS

In such cases, submit an application to the jurisdictional assessing officer (TDS), explaining the reasons for cancellation. You might also need to include supporting documents depending on the specific situation.

What Are the Benefits of TAN?

TAN facilitates TDS deposits to the government, the generation of Form 16, and simplifies TDS return filing, thereby helping you avoid penalties. It also enables deductions such as salary, interest, or dividends, ensuring compliance with tax regulations and accurate reporting of tax liabilities.

Why Do You Need TAN?

TAN enables the deposit of TDS into the central government account number for tax deduction and facilitates the generation of Form 16. The ITD also uses TAN to automatically capture details such as your name, address, and postal index number. Moreover, TAN is important for filing TDS account returns, generating challans, and issuing certificates.

How Does TAN Affect Your Tax Deduction?

TAN is important for individuals or organisations responsible for deducting or collecting tax at source. It ensures compliance with tax regulations by accurately deducting taxes from payments such as salaries, commissions, and other income sources. Without TAN, TDS registration cannot be legally made and can potentially result in non-compliance penalties. Therefore, having a valid TAN is essential for conducting lawful financial transactions while adhering to tax laws in India.

What Is the Difference Between TAN, TIN, and PAN?

Tax Deduction and Collection Account Number (TAN): TAN is issued to organisations or individuals responsible for deducting or collecting tax at source. It is primarily used for reporting and remitting taxes deducted at source to the government. TAN is required for making payments such as salaries, interest, dividends, etc., where TDS applies.

Taxpayer Identification Number (TIN): TIN is used to identify businesses or entities registered under VAT (Value Added Tax). This taxpayer ID or tax ID number is issued by the respective state commercial tax departments and is used for sales tax purposes and to track VAT transactions. 

Permanent Account Number (PAN): A PAN is a unique 10-digit alphanumeric identifier issued to individuals, firms, and companies. It is issued by the Income Tax Department under the supervision of the Central Board of Direct Taxes (CBDT) and serves as a universal identification key for all financial transactions and dealings with the Income Tax Department.

Conclusion

Obtaining a TAN is necessary for any entity responsible for collecting or deducting tax at source. It not only simplifies TDS filing but also ensures tax compliance to avoid any penalties or legal issues. You can either apply for a TAN online on the TIN-NSDL website or download the form and submit the filled document at your nearest TIN Facilitation Centre.

A TAN is especially important for businesses dealing with financial transactions that involve tax deductions. For instance, enterprises often turn towards business loans to fund various goals such as enhancing working capital or purchasing new equipment. A valid TAN can demonstrate a business’s adherence to tax laws and a commitment to responsible financial management, contributing to business credibility which is an important consideration for loan approval. As long as you fulfil the lender eligibility criteria, a valid TAN along with consistent tax compliance can help strengthen your loan application.

If you are starting a new venture, want to expand your operations, or have any other business goal in mind, SMFG India Credit can support your needs with unsecured business loans of up to INR 75 lakhs*. Our competitive interest rates and flexible repayment options make sure that you can manage your cash flow efficiently. Apply now or get in touch with us to know more.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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