Module 2: TAN, Registration & Basic Compliance
Understanding TAN Requirements Before Deducting TDS
Introduction
Before deducting even ₹1 of TDS, the most important compliance requirement is obtaining a Tax Deduction and Collection Account Number (TAN). Many businesses unknowingly deduct TDS without TAN, which leads to penalties, rejected returns, and notices from the Income Tax Department.
In this Module 2 of our TDS Course, we explain what TAN is, who is required to obtain it, how to apply online, how to link it with PAN, common mistakes to avoid, and situations where TAN is not required.
Quick Summary (Module Snapshot)
- TAN is mandatory for most TDS deductors
- Without TAN, TDS return filing is not possible
- TAN is different from PAN and serves a specific purpose
- Incorrect TAN details lead to defaults and notices
- Certain individuals can deduct TDS without TAN
Table of Contents
- What is TAN?
- Who Needs TAN?
- TAN Application Process (Online)
- Linking TAN with PAN
- Common TAN Mistakes
- When TAN is Not Required
- Conclusion
What is TAN?
TAN (Tax Deduction and Collection Account Number) is a 10-digit alphanumeric number issued by the Income Tax Department to persons who are responsible for deducting or collecting tax at source.
Structure of TAN:
- First 4 characters – Alphabet (Jurisdiction code)
- Next 5 characters – Numeric
- Last character – Alphabet
📌 Legal Basis:
Section 203A of the Income Tax Act mandates obtaining TAN for TDS compliance.
Who Needs TAN?
TAN is compulsory for every person responsible for deducting TDS, including:
- Companies (Private / LLP / Public)
- Partnership firms
- Proprietorships
- Trusts & NGOs
- Employers deducting salary TDS
Businesses deducting TDS on:
- Contractors
- Professionals
- Rent
- Commission
- Interest
- Purchase of goods (194Q)
👉 Important: Even if you deduct TDS only once, TAN is mandatory (unless specifically exempted).
TAN Application Process (Online)
Applying for TAN is simple and fully online.
Step-by-Step Process:
- Visit NSDL TAN application portal
- Select Form 49B
Fill basic details:
- Name of deductor
- Address
- Type of deductor
- PAN details
- Submit the form
- Pay application fee (nominal amount)
- Acknowledgement is generated
- TAN is allotted within a few working days
📌 TAN is issued only once and remains valid for lifetime.
Linking TAN with PAN
Though TAN and PAN serve different purposes, linking is essential for smooth compliance.
Why Linking is Important:
- Mandatory for TDS return filing
- Required for Form 16 / 16A generation
- Helps avoid defaults and mismatches
Common Linking Issues:
- Wrong PAN mapped with TAN
- Multiple TANs for same entity
- Incorrect deductor category
👉 PAN is for identity & income tax, TAN is for TDS compliance — both must be correct and consistent.
Common TAN Mistakes
Many deductors face notices due to avoidable errors:
❌ Common Errors:
- Deducting TDS without TAN
- Applying for multiple TANs for same entity
- Using wrong TAN in challan or returns
- Not updating address or details
- Quoting incorrect TAN in Form 16 / 16A
⚠️ Consequences:
- TDS return rejection
- Defaults under Section 200A
- Penalty of ₹10,000 under Section 272BB
- Difficulty in compliance and audits
When TAN is Not Required
There are specific cases where TAN is not mandatory:
1. TDS on Purchase of Property – Section 194IA
- Buyer deducts TDS using PAN only
- Payment via Form 26QB
2. TDS on Rent by Individual – Section 194IB
- Applicable for individuals/HUFs not liable to audit
- Paid via Form 26QC
- PAN is sufficient
3. TDS by Individuals under Section 194M
- Payments to professionals/contractors above threshold
- No TAN required
- Payment via Form 26QD
📌 In these cases, special challan-cum-statements replace TAN-based compliance.
Conclusion
TAN is the foundation of TDS compliance. Without TAN, deductors cannot deposit TDS correctly, file returns, or issue certificates. Obtaining TAN at the right time and maintaining correct TAN-PAN mapping ensures smooth, error-free compliance.
This module makes you compliance-ready before moving into actual deduction, challans, and return filing.
Call to Action
If you need help with:
- TAN application or correction
- Reviewing your TDS compliance
- Avoiding defaults and penalties
📞 Contact Verotus Finlegal Solutions LLP
for expert TDS and income tax compliance support.
🌐 Visit: www.verotusllp.com
