How to Apply for a TAN and Start TDS Compliance the Right Way
- Pritish Sahoo
- 16 hours ago
- 8 min read
Applying for a Tax Deduction and Collection Account Number is mandatory for anyone required to deduct or collect tax at source in India. Without a valid TAN, TDS payments, returns, and certificates cannot be processed correctly, leading to penalties and compliance issues. TAN registration under Section 203A of the Income Tax Act is the starting point for lawful TDS compliance. Once allotted, deductors must follow a structured process covering deduction, deposit, return filing, and certificate issuance. Understanding this end-to-end flow helps businesses, professionals, and employers avoid errors and stay compliant from day one.
Table of Contents
What Is TAN and Why Is It Mandatory for TDS Compliance
TAN, or Tax Deduction and Collection Account Number, is a unique 10-character alphanumeric number issued by the Income Tax Department. It is mandatory for any person or entity responsible for deducting or collecting tax at source. TAN acts as the primary identifier for tracking TDS payments, returns, and certificates across the tax system. Without a valid TAN, TDS challans cannot be deposited correctly, quarterly returns cannot be filed, and deductees will not receive proper tax credit. The law makes TAN compulsory to ensure traceability and accountability in tax deduction and reporting.
Who Is Required to Apply for a TAN Under Section 203A
Any person liable to deduct or collect tax at source must apply for a TAN under Section 203A of the Income Tax Act. This includes employers deducting TDS on salaries, businesses making payments such as commission, rent, professional fees, or contract payments, and individuals or entities deducting TDS under specific provisions. Government offices, companies, partnership firms, trusts, and even individuals covered under TDS provisions are required to hold a TAN. The obligation arises from the nature of the payment, not the size or frequency alone.
How to Apply for a TAN Online Using Form 49B
The online TAN application process is completed through Form 49B on the NSDL TIN platform. Applicants must select the correct category, enter accurate name and address details, provide contact information, and quote PAN where available. No documents are uploaded during the online process, but the information entered must exactly match official records. After submission, an acknowledgement is generated. The prescribed fee is paid online, and a signed acknowledgement must be sent to NSDL within the specified timeframe. TAN is generally allotted within one to two weeks and communicated via email or post.
Offline TAN Application Process Through TIN Facilitation Centres
Applicants preferring the offline route can submit Form 49B at authorised TIN Facilitation Centres. The form must be filled manually and supported with identity and address proof. Payment of the applicable fee can be made in cash or a demand draft. The centre verifies the form and forwards it for processing. This option is commonly used by applicants who are not comfortable with online filing or require assistance in completing the form correctly.
Documents and Information Required for TAN Application
For online applications, no documents are uploaded, but accurate details are essential, including full legal name, address, contact details, entity status, and PAN if available. For offline applications, proof of identity and address is required, along with authorisation documents in case of firms or companies. Incorrect or inconsistent details are a common reason for delays or rejection, making careful verification essential at the application stage.
Timeline for TAN Allotment and How to Track Application Status
Once the application is submitted and payment is completed, TAN is typically allotted within one to two weeks. Applicants can track the status using the acknowledgement number generated during submission. Status updates indicate whether the application is under processing, approved, or dispatched. Delays usually occur due to mismatched details or unsigned acknowledgements in online submissions.
What to Do After TAN Allotment Before Deducting TDS
After receiving the TAN, deductors should ensure that their bank account is enabled for TDS payments and linked for online challan deposits. Internal systems should be updated to capture deductee PAN details, payment nature, applicable TDS rates, and deduction thresholds. Proper configuration at this stage prevents errors during challan payment and return filing. Deduction should only begin once TAN details are correctly mapped in accounting and payroll systems.
How TDS Deduction Works After Getting a TAN
TDS must be deducted at the time of credit or payment, whichever is earlier, at rates prescribed under the relevant sections of the Income Tax Act. The rate and threshold depend on the nature of the payment and the deductee's status. Deductors must ensure PAN details of deductees are correctly captured, as incorrect PAN leads to higher deduction rates and credit mismatches. Every deduction made must be traceable to a corresponding challan and return entry.
TDS Payment Process Using Challan 281
TDS deducted must be deposited using Challan 281 through authorised banks, typically via net banking. The challan requires accurate entry of TAN, assessment year, nature of payment, and amount. Upon successful payment, the bank generates a challan identification number consisting of the BSR code, date of deposit, and serial number. This information is critical for return filing and reconciliation. Payments are generally due by the 7th of the following month, with specific exceptions for March deductions.
TDS Return Filing Requirements and Applicable Forms
TDS returns must be filed quarterly using the appropriate form based on the type of payment. Form 24Q applies to salary payments, Form 26Q to non-salary resident payments, and Form 27Q to payments made to non-residents. Returns must include deductee-wise details, challan information, and deduction amounts. The return file is prepared using the prescribed utility, validated, and uploaded through the income tax portal using a digital signature.
TDS Return Due Dates and Penalties for Late Filing
Quarterly TDS returns have fixed due dates, and delays attract mandatory late fees under Section 234E calculated on a per-day basis. In addition to late fees, incorrect or non-filing can trigger penalties and scrutiny notices. Interest may also apply for delayed deduction or deposit. Consistent delays can result in compliance risks and reputational issues with vendors and employees.
Issuance of TDS Certificates and Ongoing Compliance Obligations
After filing TDS returns, deductors must issue TDS certificates to deductees within the prescribed timelines. Form 16 is issued for salary payments, while Form 16A is issued for other payments. These certificates enable deductees to claim a tax credit while filing their returns. TAN must be quoted on all TDS certificates, challans, returns, and related correspondence. Ongoing compliance includes reconciliation with Form 26AS and AIS to ensure accurate credit reflection.
Common TAN and TDS Compliance Mistakes to Avoid
Frequent mistakes include incorrect TAN or PAN entry, delayed challan payment, mismatched challan details, wrong section selection, and failure to issue certificates on time. Treating TDS as a standalone task rather than part of overall tax compliance often leads to errors. Regular reconciliation and structured workflows help prevent notices and penalties.
How Digital Platforms Simplify TAN and TDS Compliance
Digital compliance platforms integrate TAN management, challan payment tracking, return filing, and reconciliation into a single workflow. Automated validations reduce data entry errors, reminders help meet deadlines, and system-based reconciliation ensures correct credit reflection. Such platforms are especially useful for businesses handling multiple deductees or recurring payments.
Conclusion
TAN application is the foundation of lawful TDS compliance, but correct execution depends on timely deductions, accurate deposits, proper return filing, and certificate issuance. Managing these processes manually increases the risk of errors and penalties. For anyone looking for assistance in TDS compliance and related tax filings, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Is TAN mandatory for all types of TDS deductions?
Yes, TAN is mandatory for all persons and entities required to deduct or collect tax at source under the Income Tax Act. Without a valid TAN, TDS challans cannot be deposited, returns cannot be filed, and TDS certificates cannot be issued. Even a single TDS transaction requires TAN compliance if the law mandates deduction.
Q2. Can PAN be used instead of TAN for TDS compliance?
No, PAN cannot replace TAN for TDS-related activities. PAN identifies the taxpayer, while TAN specifically identifies the deductor or collector of tax. TDS payments, returns, certificates, and correspondence with the Income Tax Department require quoting of TAN, not PAN.
Q3. Who needs to apply for TAN under Section 203A of the Income Tax Act?
Any employer, business, professional, firm, company, trust, or individual required to deduct or collect tax at source must apply for a TAN under Section 203A. The requirement depends on the nature of the payment and TDS applicability, not on turnover or frequency of transactions.
Q4. Is TAN required if TDS is deducted only once or occasionally?
Yes, TAN is required even if TDS is deducted only once. The obligation arises as soon as a payment attracts TDS under the law. There is no exemption for one-time or infrequent deductions.
Q5. How long does it take to get a TAN after applying?
Once Form 49B is submitted correctly and the fee is paid, TAN is generally allotted within one to two weeks. Delays may occur if details are incorrect, the acknowledgement is unsigned, or payment issues arise. Application status can be tracked using the acknowledgement number.
Q6. Can TDS be deducted before receiving the TAN allotment?
Practically, TDS should be deducted only after TAN is allotted. Deducting tax without a TAN creates reporting and reconciliation issues, as challans and returns cannot be correctly mapped without quoting a TAN.
Q7. What happens if TDS is deducted but not deposited on time?
Late deposit of TDS attracts interest under Section 201 at the prescribed monthly rates. Continued delays can also result in penalties and system-generated notices. In addition, mismatches may appear in Form 26AS and AIS, affecting the deductee tax credit.
Q8. Is it mandatory to file TDS returns even if no tax was deducted in a quarter?
If a TAN is active and the deductor was liable to deduct tax during the quarter, returns may still be required depending on the circumstances. Nil returns are sometimes advisable to avoid non-filing notices. Compliance expectations depend on transaction activity and prior filings.
Q9. What are the penalties for late filing of TDS returns?
Late filing attracts a fee under Section 234E, calculated on a per-day basis until the return is filed, subject to limits. In serious or repeated cases, additional penalties may be imposed, and notices may be issued for non-compliance.
Q10. Why is the correct PAN of deductees important in TDS compliance?
Incorrect or missing PAN leads to higher TDS rates and credit mismatches. Deductees may not receive proper credit in Form 26AS, resulting in disputes and rectification requests. Accurate PAN capture is essential for clean reconciliation and compliance.
Q11. How does TAN relate to Form 26AS and AIS of deductees?
All TDS entries reported using the TAN flow into Form 26AS and AIS of deductees. Any error in TAN, challan details, or return data directly affects credit visibility. Proper TAN-based reporting ensures deductees can claim tax credit smoothly while filing returns.
Q12. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing?
Yes, TaxBuddy offers both self-filing and expert-assisted plans. Users can choose a guided self-filing option for simpler cases or opt for expert-assisted support for complex tax situations, ensuring accurate compliance and post-filing assistance.
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