TAN Full Form: Unlocking the Significant Component of  Tax Compliance Mechanism

What is the TAN Full Form?

The TAN full form in income tax is Tax Deduction and Collection Account Number. The income tax department functions under the central government of India. The department issues a 10-digit alphanumeric number to people liable to collect tax at source or deduct tax at source under section 203A under the Income Tax Act.

Still wondering as to what is TAN Full Form? Look no further! Keep reading about the TAN’s Full Form in income tax, its meaning and structure, how to get a tan number and its components affecting the tax department of the central government in India.

Understanding the Meaning of TAN Numbers

The TAN number is a unique formation of alphabets and numbers. This number is mandatory for individuals and businesses who are subjected to pay or collect tax on cash payments. The TAN number must be included in all the TDS returns and receipts when the tax is paid.

The TAN number has been subjected to various revisions since its inception. The present TAN number comprises 5 alphabets and 5 numerals. The structure of the TAN number has 4 alphabets in the beginning, followed by 4 numerals and 1 alphabet at the end.

The structure is as follows:

• The first 3 alphabets showcase the jurisdiction code of the TAN number holder.
•  The 4th alphabet is the initial of the holder’s official name.
•  The 5 numerals of the TAN number are exclusive to the holder’s unique aspect.
•  At last, the 5th alphabet is added as a unique identifying entity.

Exploring the Process of Achieving TAN Number

We are pretty sure that you would have understood the answer to what is TAN number. So, moving on to the secondary aspect of the TAN number, we must discuss how to get a TAN number.

To obtain a TAN number, you need to meet certain eligibility criteria. You must apply for a TAN number;

• If you are responsible for deducting and collecting the tax at source. However, it must be noted that if you are required to deduct tax under section 194IA (*), you can use PAN in place of TAN.
•  (*) Section 194IA provides for tax deduction at source (TDS) from payment on transferring tangible and immovable possessions except agricultural land.

Application Process to Obtain TAN Number

You can apply for the TAN number as soon as you meet the eligibility prerequisites. You must follow the application process religiously to obtain your TAN number. It can be done online and offline. You can submit your application form to the nearest TIN Facilitation Center or apply online. The following process will get you through the acquisition of your unique TAN number through online mode.

• Go to the official website of the National Securities Depository Limited. Choose “New TAN” from the “Apply Online” drop-down box to process your application.
•  Select the category of Deductors.
•  Fill up the mandatory and general details on the form.
•  Choose the confirm option and apply.
•  The payment page will be displayed. Process your payment to complete the application process. An acknowledgement receipt will be sent to you for confirmation.
•  You must save and print the acknowledgment receipt. It is mandatory to send the receipt to Protean formerly known as NSDL eGov along with the necessary documents for further processing.

Necessary Documents Required During TAN Application Process

The documents required for the TAN application are:

• PAN number of applicant
•  Personal Information of Deductor such as Name, Address, Contact Details
•  Incorporation certificate of companies
•  Digital Signature Certificate(DSC) of Responsible person of Company
•  Personal Details of Responsible Person

Importance of TAN for Deductors and Collectors

Let’s discuss some of the reasons why TAN is important for deductors and collectors.

• Adhering to the tax laws and regulations: The Income Tax Act, 1961 cites that every person or entity liable to collect or deduct tax at source must have a TAN number. Failing to have one or inserting the wrong TAN number can lead to penalties.
• Facilitating less fraud: Possessing a TAN number ensures that you deduct or collect a TAN number under an authorized person.
• Deducting and collecting tax at source: The TAN number is used to help identify the person who has deducted or collected the taxes at source.
• Online payment of taxes: You can avoid the hassle of the offline process if you have a TAN number. You can also file TDS returns online.

Responsibilities and Obligations of TAN Holders

The TAN holders are responsible for certain activities. 

• TAN holders are needed to collect or deduct tax at source based on the applicable tax rates.
• After deducting or collecting taxes at the source, depositing the tax amounts to the government within the prescribed timelines is crucial. Failing to do so can result in fines and other legal consequences.
• TAN holders must file TDS/TCS Returns. These returns comprise details of the tax deductions and collections made during a specific period. Moreover, TAN holders must issue TDS and TCS certificates to the deductees as proof of tax deductions and collections.

Role of TAN in Business Processes

TAN is important in business transactions. Let us discuss the role of TAN in business transactions.

• The TDS or TCS is associated with the TAN. It is linked to ascertaining and setting off the GST. Every business should apply for the TAN. An entity can apply for the same through the NSDL portal. The NSDL is vital in evaluating the final set-off tax amount under multiple combinations of Input/Output GST and Integrated/State/Central GST.
• Businesses possessing TAN can be exempt from the final tax consideration. Different payment methods have different levels of charges accompanying them. Therefore, any receipt of rent of more than 1,80,000 and a professional fee of more than 30,000 are subject to TDS. Moreover, it must be linked with TAN to ensure transparency.

TAN Verification and Penalty Provisions

TAN verification is useful for all TAN holders and deductions because deductors can easily and promptly receive information from the Income Tax Department about the tax collected or deducted at the source. The verified TAN is available on the database of active TAN details of the department. Thus, necessary information is received by the verified TAN holders quickly.

The verified deductors have a provision of penalty. If you do not apply for a TAN number or the TAN number is not quoted properly or if you are not intimidated, you attract a penalty of ₹10,000 under section 272B of the Income Tax Act. However, you can rectify the errors by submitting the request form to the Income Tax Department through ‘Rectification under Section 154’

Changes and Updates in TAN Procedures

There have been major changes in the TAN utility and verification methods. The TAN methods have changed and updated to simplify the online processes and techniques. More centres for TAN corrections have been set up to facilitate simple processes for rectifying mistakes or discrepancies. These simple processes have made people get rid of hasty and complex TAN-related tactics and paperwork.

Final Words

In a nutshell, TAN has undergone various changes since digitization. While the TAN number has witnessed multiple changes in its structures, the tax compliance mechanism has balanced the various business and individual transactions. TAN has helped the deductors and collectors do the work without haste. You can witness the transparency in your transaction due to the verified TAN number as you can communicate easily and quickly by itself. Thus, every tax deductor and tax collector must know the significance of TAN. They should be up to date with the rules and provisions of the income tax department so that they can streamline their filing tax return and other application process.

Learn more about some other full forms:

NPA Full Form	CIBIL Full Form
CVV Full Form	SLR Full Form
PAN Full Form	IFSC Full Form
IGST Full Form	SIP Full Form
CMA Full Form	KYC Full Form

TAN Full Form: FAQ’s