The readers of this blog must have come across “TAN” or Tax Deduction Account Number multiple times in my posts on NRI’s and TDS on Sale of Property. It is also known as Tax Collection Account Number. Similar to PAN, it is also a 10-digit alphanumeric number issued by the department of Income Tax. There is a misconception that if the buyer has PAN for property transaction in case of NRI seller then TAN is not required. It is not a correct understanding. It is mandatory for a buyer to obtain TAN in case the seller is NRI and TDS will be deducted u/s 195.
Another misconception is that if the seller obtains NIL Tax deduction certificate then also TAN is not required. For more details on NIL Tax deduction certificate, you may check my post How NRI’s can lower TDS on Property Sale? Firstly, In the majority of the cases, the “NIL” Tax deduction certificate is not a 0% Tax deduction certificate. To record a transaction IT department issue a certificate to deduct TDS at a nominal rate say 0.20% or 0.10%. Secondly, even in the case of NIL Tax deduction certificate, the buyer has to file NIL TDS Return. Normally buyers think that with the issuance of NIL Tax deduction certificate the TDS process is OVER. It is not correct.
TAN or Tax Deduction Account Number
As i mentioned that TAN is a 10-digit alphanumeric code. The first 4 digits are alphabets. The next 5 are random numbers / numeric and the last digit is again an alphabet. The sample TAN is as follows
MUM N 12345 P
First 3 Digits: It represents the TAN jurisdiction code. For example, MUM for Mumbai, DEL for Delhi and BLR for Bangalore
4th Digit: Initial of the name of the TAN holder. For example, in my TAN it is N. On the other hand, 4th digit of a TAN of a company ABC Limited will be A. The TAN holder can be individual, company, firm etc. Unlike PAN or Permanent Account Number, from the TAN number you cannot find out whether the TAN holder is an individual, Company, Trust, Local Authority etc.
The Next 5 digits are Numeric
The last digit: It is the check digit. You will not find this info anywhere on the internet. I am sharing the secret formula with you how the last digit in TAN is assigned :). The 5-digit numeric value is divided by the number 7. The remainder of the division will be between 0 to 6 as the numeric value is divided by the number 7. Therefore, the last digit or check digit will depend on the remainder of the division. The matrix of remainder and corresponding digit is as follows
0 = A
1 = B
2 = C
3 = D
4 = E
5 = F
6 = G
As i explained anyone and everyone who is liable to deduct or collect tax at source should obtain TAN. The only exception is TDS u/s 194IA in the case of resident Indian seller wherein PAN can be used instead of TAN.
Where is it mandatory to quote TAN?
Under section 203A of the Income Tax Act, 1961 it is mandatory to quote Tax Deduction Account Number in following documents
- TDS Statements. Also known as TDS returns
- TCS Statements. Also known as TCS returns
- Annual Information Return
- Payment challans of TDS / TCS
- TDS / TCS Certificates
- Documents as prescribed by the Income Tax Department or Govt of India from time to time
If you fail to quote Tax Deduction Account Number where it is mandatory then you can be fined Rs 10,000 under section 272BB. It includes failure to obtain TAN or quoting incorrect Tax Deduction Account Number.
How to apply for TAN?
You can obtain Tax Deduction Account Number both online and offline. You need to file form 49B for applying for Tax Deduction Account Number. In case the company is not registered under Companies Act, 2013, fill Form No. INC-7 specified under sub-section (1) of section 7 of the Companies Act, 2013.
Personally, i will suggest applying online through NSDL-TIN website as it is much faster compared to offline. You will be charged nominal fees of Rs 55 + service tax. Normally, you will get Tax Deduction Account Number within 10-14 days from the date of application. The link for online application is as follows
After 3 days, you can check the status of your application online on NSDL-TIN website under “Status Track” option. You need 14 digit acknowledgment number for the same. The same facility i.e. to check the status of the application is available on the website of the income tax department.
What are the documents required?
Quite surprisingly you need not submit any documents along with the offline application for TAN allotment. In the case of online application, you need to sign the acknowledgment generated on successful submission of TAN application. You should send signed acknowledgment to NSDL. The address and other necessary details are mentioned on the acknowledgment and are also available on NSDL-TIN website.
Other Common Misconceptions
1. You need separate TAN for property transactions: To clarify single Tax Deduction Account Number suffice for all types of deduction and collection be it property, interest, salary etc. The only catch is that type of TAN holder or category of deductor should be same in each transaction. I will explain it in next point.
2. Can i use my company’s TAN for Property TDS deduction: This is a common query from business class. The answer is YES provided you are buying a property in your company’s name. If you are buying a property as an individual then you need separate Tax Deduction Account Number with the category of deductor as “Individual”. In this case, you cannot use your company’s Tax Deduction Account Number to deduct and deposit TDS as an individual buyer. At the same time, similar to PAN you cannot hold more than One Tax Deduction Account Number under the same category of deductor say “Individual”.
3. Quote PAN instead of TAN: It is one of the biggest misconceptions. Recently, one of the readers of the blog posted a query that his friends are suggesting him to quote PAN instead of Tax Deduction Account Number while filing challan 281. One of the reasons for this wrong notion is that both the PAN and Tax Deduction Account Number are a 10-digit alphanumeric number. As i mentioned, the only exception to this rule is if you are deducting and depositing TDS u/s 194IA. In this case, instead of Tax Deduction Account Number, you can quote PAN otherwise, you may be fined Rs 10,000 for quoting incorrect TAN.
Words of Wisdom:
The process to obtain Tax Deduction Account Number is very simple and straight forward. I receive queries on hiring an agent who can help in obtaining Tax Deduction Account Number. Trust me it is not required. You can apply online and you can easily get TAN within 2 weeks time.
It is important not to trust or believe some of the common misconceptions. The purpose of PAN and TAN are different. It is quite unfortunate that some of the knowledgeable professionals are also responsible for spreading these misconceptions. Always remember that besides penalty for not obtaining TAN there are additional penalties for not deducting/depositing TDS. Last but not least, the TDS is buyer’s responsibility and a buyer cannot claim ignorance for non-compliance.
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