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Purpose of TAN
What is TAN?
TAN i.e. Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting tax at source or collecting tax at source. It is compulsory to quote TAN in TDS/TCS return, any TDS/TCS payment challan, TDS/TCS certificates, and other documents as may be prescribed.
Who must apply for TAN?
Every person liable to deduct tax at source or collect tax at source is required to obtain TAN. However, a person required to deduct tax under Section 194-IA, Section 194-IB, Section 194M, and Section 194S (for specified person) (*) can use PAN in place of TAN as such person is not required to obtain TAN.
(*) Section 194-IA provides for deduction of tax at source from payment on transfer of certain immovable property other than agricultural land.
(*) Section 194-IB provides for deduction of tax at source from the rent paid or payable for an immovable property.
(*) Section 194M provides for deduction of tax at source from amount paid or payable to a contractor or professional.
(*) Section 194S provides for deduction of tax at source from payment on transfer of Virtual Digital Asset.
Why is it necessary to have 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 TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan, TDS/TCS certificates and other documents as may be prescribed. As per section 272BB, failure to apply for TAN or not quoting the TAN in the specified documents attracts a penalty of Rs. 10,000/-.