TAN Registration for Salary, Contractor, Rent, and Property Payments
- Kanchan Bhatt
- 19 hours ago
- 9 min read
TAN registration is mandatory for anyone responsible for deducting tax at source on payments such as salary, contractor fees, rent, or property transactions. Under the Income Tax Act, a Tax Deduction and Collection Account Number is required to deposit TDS, file returns, and issue certificates. Without TAN, TDS compliance cannot be completed, even if tax has been correctly deducted. Employers, businesses, landlords, and property buyers must understand when TAN is required, when PAN is sufficient, and how a single TAN covers multiple payment types. Non-compliance attracts a penalty of ₹10,000.
Table of Contents
What Is TAN and Why It Is 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 to persons responsible for deducting or collecting tax at source. It acts as the primary identifier for tracking all TDS-related activities such as tax deduction, deposit, return filing, and issuance of TDS certificates.
TAN is mandatory because the entire TDS ecosystem is system-driven. Without quoting TAN, the Income Tax Department cannot map tax deductions to the deductor, validate challans, or process TDS returns. Even if tax is correctly deducted and paid, failure to quote TAN renders the compliance incomplete and invalid under the law.
Who Is Required to Obtain a TAN Under the Income Tax Act
Under the Income Tax Act, the requirement to obtain a Tax Deduction and Collection Account Number (TAN) is directly linked to the obligation to deduct tax at source. Any person or entity that is responsible for deducting TDS under any provision of the Act must obtain a TAN before carrying out the deduction or depositing the tax with the government.
This requirement applies across a wide range of entities, including companies, partnership firms, sole proprietors, limited liability partnerships, trusts, societies, associations, and government departments. The law does not differentiate between large and small organisations for this purpose. If an entity is required to deduct tax under sections such as salary payments, contractual payments, rent, professional fees, or payments to non-residents, TAN registration becomes mandatory.
Individuals and Hindu Undivided Families are also covered under this requirement when they fall within specified TDS provisions. For example, individuals or HUFs who are liable to deduct TDS on rent, contractual payments, or professional fees under applicable sections must obtain a TAN, even if they are not otherwise engaged in business or profession. The obligation arises purely from the act of deduction and not from the status of the taxpayer.
TAN serves as a unique identification number for all TDS-related compliances. It must be quoted in TDS challans, TDS returns, certificates issued to deductees, and all correspondence with the income tax department related to tax deduction. Without a valid TAN, it is not possible to file TDS returns or deposit tax correctly, which can lead to penalties and compliance failures.
Once a person becomes liable to deduct tax under any section of the Act, a TAN must be obtained before making the payment to the deductee or remitting tax to the government. Delaying or ignoring TAN registration can result in procedural lapses, incorrect filings, and potential penal consequences. Therefore, understanding when TAN is required and ensuring timely registration is a fundamental step in meeting TDS compliance obligations under Indian tax law.
TAN Registration for Salary Payments and Employer TDS
TAN registration is a fundamental compliance requirement for employers who are responsible for deducting tax on salary payments under Section 192 of the Income Tax Act, 1961. Once an employee’s estimated annual income crosses the basic exemption limit, the employer is legally required to deduct tax at source and report it to the Income Tax Department. For this entire process, possession of a valid Tax Deduction and Collection Account Number is compulsory.
TAN acts as the unique identifier for all TDS-related activities carried out by an employer. It is required at every stage of salary TDS compliance, starting from depositing the deducted tax through challans, to filing quarterly TDS returns in Form 24Q. These returns capture employee-wise salary details, tax deducted, and challan information, and they are linked to the employer’s TAN. Without a valid TAN, salary TDS challans cannot be validated by the system, which makes it impossible to complete the statutory reporting process.
Issuance of Form 16 to employees is also dependent on a valid TAN. Form 16 serves as the official salary TDS certificate and is generated based on the data filed in Form 24Q. If an employer does not have a TAN or fails to quote it correctly, employees may face issues while claiming TDS credit in their income tax returns due to mismatches in Form 26AS and AIS.
The requirement to obtain TAN applies uniformly, irrespective of the size of the organisation. Even startups, small businesses, or proprietors with a limited number of employees must apply for TAN if salary TDS is deducted at any point during the financial year. The obligation does not depend on the number of employees or the frequency of salary payments, but solely on the act of deducting tax at source.
Non-compliance with TAN requirements can result in penalties and procedural delays. Depositing TDS without TAN or attempting to file returns using incorrect details often leads to rejection of filings and additional compliance burdens. To avoid these issues, employers are advised to obtain a TAN at the time of hiring the first employee whose income is likely to attract TDS, ensuring uninterrupted compliance throughout the year.
TAN Registration for Contractor Payments Under Section 194C
Payments made to contractors or sub-contractors attract TDS under Section 194C when the payment exceeds the prescribed thresholds. This applies to contracts for work, labour, advertising, transport, and similar services.
TAN is required to deduct, deposit, and report contractor TDS through Form 26Q. Each contractor payment linked to TDS must carry the deductor’s TAN to ensure proper credit to the contractor and avoid mismatches in Form 26AS and AIS.
TAN Requirement for Rent Payments and Property Transactions
TDS on rent is governed by Section 194I, applicable when the annual rent exceeds the specified limit. Landlords receiving rent for land, building, plant, or machinery are subject to TDS deductions by the payer.
Similarly, certain property-related transactions require TDS deduction. In such cases, TAN becomes mandatory to deposit the tax and file applicable TDS returns. Without TAN, rent and property-related TDS compliances cannot be completed.
Is TAN Required for Property Purchase Under Section 194-IA
For the purchase of immovable property exceeding ₹50 lakh, the buyer is required to deduct TDS under Section 194-IA. In most such cases, TAN is required to comply with the deduction and reporting process.
However, the law provides limited scenarios where PAN-based compliance is allowed instead of TAN. Outside such exceptions, buyers must obtain a TAN before making property-related payments involving TDS.
When PAN Can Be Used Instead of TAN for Rent Payments
In specific cases under Section 194-IB, individuals or HUFs paying rent exceeding ₹50,000 per month can deduct TDS using their PAN instead of obtaining a TAN. This exception is limited and does not apply to businesses or other rent-related sections.
Outside these prescribed cases, PAN cannot replace TAN. Regular rent payments covered under Section 194I require a valid TAN for deposit, return filing, and certificate issuance.
Single TAN Usage for Salary, Contractor, Rent, and Property TDS
A single TAN is sufficient for all types of TDS deductions made by the same deductor. There is no requirement to obtain separate TANs for salary, contractor payments, rent, or property transactions.
Once allotted, the same TAN must be consistently used across all TDS challans, quarterly returns, and certificates. Using multiple TANs or quoting incorrect TANs often leads to mismatches and compliance notices.
Step-by-Step Process for TAN Registration Online
TAN registration is completed by submitting Form 49B through the authorised online portal. The applicant provides basic details such as name, address, PAN, and nature of deductor.
After submission, an acknowledgement is generated, and TAN is allotted upon verification. The allotted TAN can then be used immediately for TDS payments, return filing, and compliance reporting.
TAN Usage in TDS Challans, Returns, and Bank Forms
TAN must be quoted in all TDS deposit challans, particularly while paying tax through Challan ITNS 281. It is also mandatory in quarterly TDS returns such as Forms 24Q and 26Q.
Banks and financial institutions may require TAN details in KYC or CKYC documentation when the account holder is responsible for TDS compliance. This ensures alignment between banking records and tax filings.
Penalty for Non-Registration or Incorrect TAN Usage
Failure to obtain TAN when required attracts a penalty of ₹10,000 under Section 272BB of the Income Tax Act. Quoting an incorrect TAN in returns or challans can also result in penalties and invalid filings.
Incorrect TAN usage often leads to TDS credit mismatches, delayed refunds, and notices from the Income Tax Department, increasing the compliance burden significantly.
How Platforms Like TaxBuddy Simplify TAN and TDS Compliance
Managing TAN, TDS deductions, returns, and reconciliation can be complex, especially when multiple payment types are involved. Digital platforms like TaxBuddy streamline this process by integrating TDS compliance with income tax filing.
By tracking deductions, challans, returns, and credits in one place, such platforms reduce errors and ensure that TAN-related compliances align seamlessly with overall tax filings.
Conclusion
TAN is a foundational requirement for anyone responsible for deducting tax on salary, contractor payments, rent, or property transactions. From depositing tax to filing returns and issuing certificates, every step of TDS compliance depends on correct TAN usage. Managing these obligations alongside income tax filing requires accuracy and consistency. For anyone looking for assistance in tax filing and TDS compliance, it is advisable to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q. Is TAN mandatory even if TDS is deducted only once in a year?
Yes. TAN becomes mandatory the moment a person is required to deduct TDS, even if the deduction happens only once during the financial year. The frequency or amount of deduction does not remove the obligation. Without TAN, TDS cannot be deposited or reported validly.
Q. Do individual proprietors and small businesses also need TAN?
Yes. Proprietors and small businesses must obtain a TAN if they deduct TDS on salary, contractor payments, rent, or other applicable payments. The requirement depends on the act of deduction, not the size or turnover of the business.
Q. Is TAN required if salary TDS is deducted for only one employee?
Yes. Even if a salary is paid to only one employee and TDS is deducted, TAN is mandatory. Employers cannot file Form 24Q or issue Form 16 without a valid TAN.
Q. Can one TAN be used for multiple branches or offices?
Yes. A single TAN can be used across multiple branches if TDS compliance is centrally managed. However, if separate branches handle independent TDS filings, separate TANs may be required based on operational structure.
Q. Is TAN required for contractor payments made occasionally?
Yes. Occasional or one-time contractor payments still attract TDS if they cross the prescribed limits. In such cases, TAN is compulsory for deducting and depositing tax and filing Form 26Q.
Q. Is TAN mandatory for rent paid for office premises?
Yes. Rent paid for office premises, warehouses, or commercial property attracts TDS under Section 194I if it exceeds the annual threshold. TAN is mandatory to comply with rent-related TDS provisions.
Q. Can PAN be used instead of TAN for property purchase TDS?
PAN-based compliance is allowed only in specific cases prescribed by law. Outside these limited scenarios, TAN is required for property-related TDS deductions, challans, and reporting.
Q. What happens if a wrong TAN is quoted in a TDS challan or return?
Quoting an incorrect TAN can lead to invalid filings, TDS credit mismatches, and notices from the Income Tax Department. Such errors usually require correction returns and additional compliance efforts.
Q. Is TAN linked to PAN, and do both need to be quoted?
Yes. TAN is linked to PAN at the deductor level. PAN identifies the entity, while TAN identifies the TDS role. Both are required in different stages of TDS and income tax compliance.
Q. Is TAN required if TDS is deducted but not deposited yet?
Yes. TAN must be obtained before depositing TDS. Depositing tax without TAN is not considered valid compliance and may result in penalties and interest.
Q. Can TAN be surrendered or cancelled if TDS activity stops?
Yes. If a person or entity permanently stops deducting TDS, a request for surrender or deactivation of TAN can be made following the prescribed procedure.
Q. How does TAN compliance connect with income tax return filing?
TAN-based TDS data flows into Form 26AS and AIS, which are used during income tax return processing. Incorrect or missing TAN details can directly impact TDS credit, refund processing, and assessment outcomes.
Comments