What Happens After TAN Is Issued and How TDS Filing Begins
- Ankita Murkute
- 19 hours ago
- 8 min read
Once a Tax Deduction and Collection Account Number is issued, the responsibility to comply with TDS provisions begins immediately. TAN is not just an identification number; it is the starting point for deducting tax, depositing it with the government, filing quarterly TDS returns, and issuing certificates to deductees. Any delay or misstep after TAN issuance can lead to penalties, interest, and system-generated notices. Understanding what follows TAN issuance is essential for employers, businesses, and professionals who are required to deduct tax at source under the Income Tax Act.
Table of Contents
What TAN Issuance Means for a Deductor
Issuance of a Tax Deduction and Collection Account Number signifies the point at which a person or entity is formally recognised by the Income Tax Department as a deductor under the TDS provisions of the Income Tax Act. This is not merely an administrative registration; it establishes a continuing statutory obligation to comply with all tax deduction at source requirements that apply to the nature of payments made by the deductor.
Once TAN is allotted, the deductor is expected to identify all payments that attract TDS under the Act, such as salary, rent, professional fees, contractual payments, interest, or payments to non-residents. The responsibility includes determining the correct TDS section, applying the appropriate rate of deduction, and ensuring that tax is deducted at the time of credit or payment, whichever occurs earlier. Even if no tax is ultimately deductible due to thresholds or exemptions, the deductor remains accountable for evaluating each payment correctly.
After deduction, the tax must be deposited with the government within the prescribed timelines using the appropriate challan and payment mode. Delays in deposit attract interest, and repeated defaults may lead to penalties. The obligation to deposit TDS exists independently of whether the deductor has received the corresponding funds from clients or counterparties, making cash flow planning an important consideration after TAN issuance.
TAN issuance also triggers the requirement to file periodic TDS returns. These returns must be filed in the correct form based on the nature of payments and the residential status of the deductees. Accurate reporting of PAN details, challan information, and deduction amounts is critical, as the tax department uses TAN as the primary reference point to reconcile TDS data with Form 26AS and AIS of deductees. Errors or omissions in returns are treated as compliance failures and often result in automated notices.
In addition to the return filing, the deductor must issue TDS certificates within the prescribed timelines. These certificates serve as formal proof of tax deduction and are necessary for deductees to claim credit while filing their income tax returns. Failure to issue certificates, or issuing them with incorrect details, is considered a statutory default and can attract penalties.
Importantly, compliance responsibility begins from the date of TAN issuance, not from the date of the first deduction. Even periods of inactivity must be monitored, as non-filing of applicable TDS returns or incorrect assumptions that no compliance is required can lead to late filing fees and system-generated demands. The tax department treats TAN as an active compliance account unless it is formally surrendered or rendered inactive as per prescribed procedures.
Overall, TAN issuance places the deductor within a regulated compliance framework where continuous monitoring, accurate reporting, and timely action are expected. Non-compliance is assessed objectively based on filings and timelines linked to the TAN, and intent or lack of actual deductions does not generally absolve the deductor from statutory consequences.
Activating TAN on the Income Tax e-Filing Portal
After allotment, TAN must be activated on the income tax e-filing portal before it can be used for deposits and return filing. Activation involves validating basic details such as PAN, contact information, and authorised signatory credentials. Without activation, challan payments and TDS return uploads may fail or remain untagged. Activation also enables access to TDS dashboards, default summaries, and correction utilities, which are critical for ongoing compliance.
Linking Bank Account After TAN Issuance
A valid bank account must be linked with the TAN profile to enable TDS payments and ensure proper challan reconciliation through OLTAS. The bank account used for deposits should be accurately reflected in TDS returns to avoid CIN mismatches. Incorrect or unlinked bank details often lead to invalid returns, unmatched challans, or processing delays. Bank linkage also becomes important where refunds or adjustments arise due to excess TDS deposits.
When TDS Deduction Becomes Mandatory After TAN
TDS obligation does not depend on the date of TAN issuance but on the nature and timing of the payment. Once TAN is issued, tax must be deducted at source at the time of credit or payment, whichever occurs earlier, whenever a transaction falls under TDS provisions. Delaying deduction after becoming liable can attract interest and penalties, even if the tax is later deposited correctly.
Applicable TDS Rates and Trigger Points
TDS rates vary based on the type of payment, such as salary, professional fees, interest, rent, or contractual payments. Each section specifies its own threshold limits and rates. Deductors must identify the correct section before applying rates, as incorrect classification leads to short deduction or an excess deduction. Trigger points are typically linked to payment thresholds and timing, making accurate transaction tracking essential.
Depositing TDS Using Challan 281 After TAN
Once tax is deducted, it must be deposited using Challan 281 within the prescribed timeline. Deposits are made monthly, with extended timelines for deductions made in March. Each deposit generates a Challan Identification Number, which acts as proof of payment and is mandatory for return filing. Any error in quoting TAN, assessment year, or amount at this stage can cause permanent mismatches.
How TDS Return Filing Begins Using TAN
TDS return filing formally begins after the first tax deposit is made using the TAN. Returns must include the deductor details, deductee PAN, payment amounts, tax deducted, and challan information. The accuracy of this data determines whether the TDS credit is reflected correctly in the deductees’ records. Returns are uploaded in validated file formats through the income tax portal.
Quarterly TDS Return Forms Linked to TAN
Different return forms apply based on the nature of payment and deductee category. Salary-related deductions are reported separately from non-salary payments and non-resident transactions. Each form is linked to the deductor’s TAN and must be selected carefully. Filing under an incorrect form can lead to defective returns and downstream mismatches.
Due Dates for TDS Filing After TAN Is Issued
TDS returns are filed quarterly, with specific due dates prescribed for each quarter. Missing these deadlines attracts late filing fees and interest, which accumulate until compliance is completed. Even nil or low-activity deductors are required to file returns once TAN is active, and deductions have occurred.
Issuing TDS Certificates After Return Filing
After successful filing of TDS returns, deductors must issue TDS certificates to deductees within the stipulated period. These certificates serve as proof of tax deduction and are used by deductees while filing income tax returns. Delays or inaccuracies in certificates often result in grievances and credit disputes.
Common Errors After TAN Issuance and Their Impact
Frequent errors include incorrect PAN details, mismatched challan data, wrong section selection, and delayed filings. Such mistakes trigger defaults that are automatically flagged by the system. These defaults can result in notices, financial penalties, and blocked future filings until corrections are completed.
How Corrections and Defaults Are Handled in TDS
When errors are identified, correction returns must be filed using the same TAN to rectify discrepancies. Defaults relating to short deduction, late deposit, or late filing are computed automatically, and demands are raised. Timely correction and payment of interest or fees are essential to close compliance gaps and prevent escalation.
Role of Technology Platforms in Post-TAN TDS Compliance
Managing TDS manually after TAN issuance becomes increasingly complex as transaction volumes grow. Technology platforms streamline deduction tracking, challan reconciliation, return preparation, and default resolution in a single workflow. Integrated systems reduce dependency on spreadsheets, minimise human error, and provide visibility into compliance status at every stage.
Conclusion
TAN issuance is only the starting point of TDS compliance. What follows requires continuous monitoring, accurate reporting, and timely corrective action to remain compliant under income tax law. Structured workflows and automated checks play a key role in preventing mismatches and penalties. For anyone looking for assistance in tax filing, it is advisable to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q. What is the first compliance step after TAN is issued?
After TAN issuance, the first step is to activate it on the income tax e-filing portal. Activation enables the deductor to deposit TDS, file returns, access default summaries, and use correction utilities. Without activation, TDS payments and return uploads may not be recognised correctly by the system.
Q. Is TDS deduction mandatory immediately after TAN allotment?
TDS deduction becomes mandatory once a payment covered under TDS provisions is made or credited. The obligation depends on the nature and timing of the transaction, not on how long the TAN has been held. Delay in deduction after liability arises can attract interest and penalties.
Q. Can TDS be deducted before linking a bank account to TAN?
TDS can be deducted, but depositing it without a properly linked bank account often results in challan mismatches. Bank linkage ensures correct CIN generation and seamless reconciliation during TDS return filing.
Q. What happens if TDS is deducted but not deposited on time?
Late deposit of TDS attracts interest calculated from the date tax was deductible to the date it is actually paid. Continued delay may also result in notices and penalties, even if the deduction itself was correct.
Q. Is filing a TDS return compulsory if TDS has already been paid?
Yes, depositing TDS alone does not complete compliance. Filing the quarterly TDS return is mandatory to report deductee details and allow tax credit reflection in Form 26AS and AIS.
Q. Which TDS return form should be used after TAN issuance?
The applicable form depends on the type of payment. Salary deductions, non-salary resident payments, non-resident payments, and TCS transactions each require different return forms. Selecting the wrong form can make the return defective.
Q. What are the consequences of incorrect PAN or challan details in TDS returns?
Incorrect PAN or challan details lead to unmatched credits, defaults, and processing errors. These issues often result in demands, late fees, and grievances from deductees whose tax credit does not reflect correctly.
Q. Can TDS returns be revised after filing?
Yes, correction returns can be filed using the same TAN to rectify errors such as incorrect PAN, challan mismatch, or reporting mistakes. Timely correction helps close defaults and prevents escalation.
Q. Is a single TAN sufficient for all branches of a business?
A single TAN is generally sufficient for an entity, but branch-wise reporting may be required in certain cases, depending on organisational structure and internal accounting practices.
Q. Are TDS certificates mandatory after return filing?
Yes, issuing TDS certificates to deductees within prescribed timelines is mandatory. These certificates serve as proof of tax deduction and are essential for deductees while filing their income tax returns.
Q. How does non-compliance after TAN issuance affect income tax assessments?
TDS non-compliance directly impacts assessments, as mismatches are auto-flagged through system reconciliation. This can lead to notices, denial of credit to deductees, and increased scrutiny.
Q. How do digital platforms help in managing post-TAN TDS compliance?
Digital platforms automate deduction tracking, challan matching, return preparation, and default management. By reducing manual intervention, they improve accuracy, ensure timely compliance, and provide better visibility into TDS obligations throughout the year.
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