KNOW ABOUT TAN BEFORE DEDUCTING TDS

What is the full form of TAN?

The full form of TAN is Tax Deduction or Collection Account Number. It is a 10 digit alphanumeric number which is required in case one becomes liable to either

• Deduct tax or
• Collect tax

at the time of making payment to another person (i.e. liable to deduct TDS or collect TCS).

What is the significance of obtaining TAN no.?

As per the tax laws of our country a person deducting TDS is required to deposit it into the treasury within specified period along with a return specifying the details as required by the government. Therefore, TAN acts as a unique identification number in all correspondence with the department. This also enables the government to credit the tax receipt and give credit to the deductee (person whose TDS was deducted). This credit is reflected in the 26AS i.e. the tax credit statement.

How a TAN no. looks like?

TAN is a 10 digit alphanumeric number. Structure of TAN is as follows: ABC D 12345 X. So first 4 characters are alphabets followed by 5 digits and then 1 alphabet in the end. First 3 alphabets of TAN no. represent the city where TAN has been allotted, 4th character of the TAN no. represent the initial letter of the name of a person. All 5 digits and the last alphabet are automated characters generated by system.

Are there any penalties if I don’t mention a TAN in my TDS return?

There are penalties in income tax act for both non-mentioning the TAN or mentioning incorrect TAN. Penalty of Rs. 10,000 is imposed in case of one does not mention TAN or mention incorrect TAN no. in TDS return.