TAN is abbreviation of Tax Deduction and Collection Number. TAN is mandatory 10 digit alpha numeric number required to be obtained by all persons who are responsible for Tax Deduction at Source (TDS) or Tax Collection at Source (TCS) on behalf of the Government. The person deducting the tax at source is required to deposit the tax deducted to the credit of Central Government by quoting their own TAN.
Individuals who are salaried are not required to obtain TAN or not required to deduct tax at source. Only when individual assessee purchases real estate worth more than Rs.50 Lakh then he has to deduct TDS @ 1% on total agreed consideration before making payment to Seller of that property. That TDS amount is to be deposited into Government Account before prescribed period as per the tax Laws. A proprietorship business and other entities (i.e. Private Limited Company, LLP, Partnership Firm etc.,) must deduct tax at source at the time of making certain payment like salary, payments to contractor or sub-contractors, payment of rent exceeding Rs.1,80,000 per year, etc. On deducting tax at source, the entity registered for TAN has to pay TDS to the Government and to issue a TDS Certificate to the deductee as proof of collection of tax from deductee.
Application is to be made for allotment of TAN in Form 49B along with the required documents. After processing of application, the TAN is allotted to the entity and the entity must quote TAN in all TDS/TCS returns, payment challans and all TDS/TCS Certificates.
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1. TDS Payments : Tax Deducted at Source must be paid at authorized bank, specifying TAN and with relevant Challan. TDS during the preceding month must be paid on or before the 7th day of the following month. Due date for TDS of March is 7th April for Government Deductor and 30th April for Other Deductors. Due date may change as per determination of Income Tax Authority from time to time. Non payment of Tax deducted at Source within due date attracts Interest for the period of delay in payment of TDS and penalty to the extent the Assessing Officer directs, subject to total amount of penalty shall not exceed the amount of tax in arrears.
2. Proprietorship Require TAN : Salaried individuals are not required to deduct tax at source. However, individuals running a proprietorship business are required to obtain TAN and deduct tax at source whenever required as per applicable threshold limits given by Income Tax Department time to time.
3. Validity of TAN : TAN is valid for lifetime. However TDS Return Filings must be made quarterly on the 31st day of July, October, January and May. Non-filing of TDS Returns within the due date attracts a penalty whichever is applicable.