What Is TAN? And Its Importance In Businesses & For Individual

What Is A TAN

Tax Collection Account Number, or in short, TAN, is a ten-digit unique number generated for Indian residents by the NSDL (National Securities Depositories Limited) on behalf of the Central Government of India that allows them to reduce/collect taxes on any cash or cash-based transactions that they are involved in. This allows individuals and businesses to assess the total tax paid to others and set it off with the total tax collected from other businesses. 

Importance of TAN For Individuals

One may argue that a PAN Card would be sufficient to submit proof while estimating the tax liabilities of individuals. However, different categories of people require different documents while submitting for tax audits, and PAN Card is just one component of it.

NRIs (Non-Resident Indians) may require the TAN if they are involved in transactions with Resident Indians or other NRIs. For example, a resident Indian purchasing a property from an NRI would be required to submit the Tax Deducted at Source and Tax Collected at Source documents to the Government. A property transaction whose value is above Rs. 50 lakhs would lead to a 1% tax exemption deduction at source as per the Income Tax Law. Thus, to submit proof of this exemption and deduction upon transfer of property ownership, the buyer (Indian) would be obliged to own a TAN.

When two NRIs are involved in a similar transaction, appropriate evidence regarding the transfer of money in INR needs to be submitted to the Government; and this is facilitated with the help of a tax break document filled up using Form 16A (under the Income Tax Law). Similarly, a property being sold by an Indian resident to an NRI mandates the latter to submit necessary documents to prove that the monetary transactions were done in INR, and a TAN would be necessary to fulfill this process. 

Also Read: Everything MSME’s Need To Know About GST

Importance of TAN For Businesses

The tax collected by vendors and suppliers in India is GST (Goods and Services Tax). The concomitant TDS (or TCS) is linked to the TAN to estimate and set off the Output GST and Input GST. MSMEs (Micro, Small, and Medium Enterprises) in India must apply for their TAN by filling up Form 49B, as required by the Indian Income Tax Law. This form is available at the NSDL portal. The NSDL serves as the mediator between the Government of India and MSMEs to ascertain the final set-off tax amount(s), considering the various combinations of Input/Output GST and Integrated/State/Central GST.

Different payment methods (Demand Draft, Cheque, NEFT, and RTGS) have different levels of charges associated with them. The final tax consideration can also be exempted when possessing a TAN. Similarly, any receipt of rent exceeding Rs.1,80,000 and paying a professional a fee of more than Rs.30,000 would be subject to tax deduction at the source (TDS), and the same would be linked with the TAN, thereby ensuring transparency and smooth linkage of the transactions for audit and estimation purposes.

Also Read: New GST Rates In 2022

Eligibility To Apply For TAN

The primary stakeholders of TAN are organizations, NRIs, and any parties involved in a transaction that requires the submission of proof of TDS to the Government of India. If the amount payable to a resident is more than Rs.50,000 a month, then a TAN is mandatory. In addition, Section 194M of the Income Tax Act, 1951 allows an annual tax deduction of 5% at the source on consideration of contractual work. Taxes on commission or brokerage fees can be deducted if the principal amount exceeds Rs. 50 lakhs.

However, there are some rules associated with the applications of TAN in India. A business entity or an individual cannot use more than one TAN. If a company uses many TAN(s), the one that had been utilized the most number of times would be considered valid, while the other TAN(s) would be considered null or void and thus terminated. On the other hand, different branches of a business entity are mandated to maintain and utilize their TAN when they involve themselves in financial transactions with vendors, suppliers, customers, contractors, and employees. 

There are various Points of Contact (POC) to get a TAN through online portals. One such platform is Indifi Technologies Private Limited (https://www.indifi.com/). They help businesses get a head start by providing them with business loans and credit facilities at low-interest rates and supplement the procurement of a Tax Deduction Account Number (or Tax Collection Account Number) to facilitate the setting-off of TDS and TCS.

Also Read: GSTIN: What Is GSTIN Number? – Check & Verify GSTIN/UIN Number Online?

The Process to be Followed When Applying for TAN on NSDL

• Type and enter https://www.tin-nsdl.com/ on the URL of any search engine
• Secondly, click on the ‘Services’ dropdown and select “TAN” from the list.
• Click on “Apply Online” to enter the required credentials
• Click on “New TAN”

At this stage, you will be redirected to a new page.

• Click on the list of “Category of Deductors” and click on “Select”

Now, you will be viewing Form 49B.

• Fill in the form and click on “Submit”

• To check the status of your TAN Application, open the NSDL e-Gov-TIN portal. Click on the “Status Track” option and enter the 14-digit unique acknowledgment number you would have received after 3 days of your application date.

Note: Be ready with all the necessary documents whose details would be required compulsorily by the form, such as Aadhar Card, PAN Card, and Address-Proof documents.

Also Read: The Ultimate Guide With GST Search

Frequently Asked Questions Related To TAN

1. Where can I obtain the TAN form?

The form can be downloaded for free from the NSDL website.

2. Can I make my own template for Form 49B on paper?

No, the document needs to be printed and filled in as structured by NSDL.

3. Should TAN codes be obtained separately for TCS and TDS?

No, only one TAN code is required to be utilized for both TCS and TDS.

4. What can I do if I cannot fill Form 49B completely?

The TIN-FC staff will help you complete the form if you request them to assist you with the same.

5. Can TAN be applied online and offline?

Yes, there are two different procedures that can be followed to apply for TAN through offline and online modes.

6. Why is TAN compulsory?

TAN is compulsory while filing for TDS/TCS Returns, TDS/TCS Challan, and TDS/TCS Certificate.