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What is TAN in the context of tax planning?


Date: 31 Mar 2016    Group: Finance and Investments    Category: Tax Planning   

We often find mention of TAN in context of income tax planning etc. What actually is TAN and what are its applications? Are all individuals required to have TAN also besides PAN? Please explain the full form of TAN together with its importance and significance?
Awaiting inputs from experts here.


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Author: Suresh Kumar R    01 Apr 2016      Member Level: Gold     Points : 2  (Rs 2)    Voting Score: 0

TAN means Tax Deduction and Collection Account Number and it will be issued by Income Tax Department.

TAN is a 10 digit alphanumeric number and it will be allotted to those who are supposed to deduct / collect TDS (Tax Deducted at Source) and it is mandatory for them

It is not necessary that all the individuals / tax payers should have TAN unlike PAN. Simply all the employers should have TAN, so that they can deduct tax from their employees.


Author: Venkiteswaran.    02 Apr 2016      Member Level: Diamond     Points : 3  (Rs 3)    Voting Score: 0

There are certain payments where Tax is to be deducted at source as per the extant guidelines and only the net amount after the TDS is to be given to the service provider, or employee's salary etc. The tax deductions mandatory and the individual or establishment that deducted tax should remit the same to the Tax authorities within specified time filling up the relevant chalan.

The TDS so deducted and remitted will be credited to the dedicatee's Income Tax account as per his PAN . Each deductor of TDS will (should) get a Tax deductor's Account Number from IT authorities. From the tax credit details with IT(F26AS) a person can find whether the TDS deducted is correctly and timely credited by seeing the TAN number, amount and date of remittance.

TAN is necessary only if you are deducting tax at source on someone's payment for services rendered or salary.


Author: Mahesh    04 Apr 2016      Member Level: Gold     Points : 3  (Rs 3)    Voting Score: 0

TAN stands for Tax Deduction and Collection Account Number. It is the number given to the person or business that collects tax on the payments obtained from others. So for example, if you are a small shop owner and collecting taxes on payment then you need TAN number.

When you are an individual and not providing any service related that requires collecting tax on it. Then you don't need such number. Instead you just need your own PAN number.

TAN numbers are unique with state, city and it is showed on the card. In the whole unique number, 5 are characters and 5 number.

The reason it was introduced is into the system was because government wanted the shop owners and service providers to collect some taxes.


Author: Manoj Chaurasia    10 Apr 2016      Member Level: Gold     Points : 15  (Rs 15)    Voting Score: 0

TAN is simply Tax Deduction Account Number. It is a kind of compliance regarding tax deduction which companies, firms, association of person and individuals (covered under tax audit) have to hold and deduct tax from the payments made to any person(s) which will be their income.
The tax deducted from the payments will be deposited to the account of Government every month and later on file quarterly return regarding the same.

To make this more understandable, it can said that expense of one person is income of another and hence as per the provisions of Income Tax which we commonly know as TDS (tax deduction at source), the tax has to be deducted from the payments made by en entity to any other entity following the limits and conditions of TDS (Detailed TDS provisions have not been explained here as they are wide and complicated).

TDS provisions says that the tax shall be deducted at the source or from where the income is generated, so therefore the tax deductions becomes responsibility of the person making the payment and not of person receiving it.
If tax is deducted then the same shall be deposited into the account of Government and return filed every quarter allocating the tax deducted to the PAN of persons whose tax has been deducted by and entity.

Once the return is filed by the person who deducted the Tax under his TAN, then only the tax deducted on particular PAN is reflected in Form 26AS.
For example if you are employed then your employer deducts tax from your salary and deposits it with the Government and files a return every quarter mentioning your PAN in the return corresponding with the amount of tax deducted from your salary. This way only you are able to see the tax credit in your Form 26AS which is available on TRACES website after logging to Income Tax website using your PAN account.

TAN has got nothing to do with tax planning but it is one of the procedures which concerned entities have to follow in order to comply with the provisions of Income Tax.

All individuals need not have to obtain PAN, but only those individuals have got to obtain TAN along with PAN who are covered under Tax Audit.
Tax audit is applicable on individuals who are doing either business or profession and their income(gross receipts) exceeds 25 lakhs in case of professional and 1 crore in case of business.

Details of business or profession can be found by searching Google.
Hope your got your answers.


Author: Manjunath Bhat    23 May 2016      Member Level: Gold     Points : 3  (Rs 3)    Voting Score: 0

Unless your have income chargeable under the head Income and gains form business / profession, you don't need to worry about getting a TAN no. I will try to explain in simple words how Tax Deduction account number and Tax Deducted as Source (TDS) works.

Say you are an employer and have 10 employees whose income is above tax exemption limit of 3,00,000/- Now as per law you will deduct Tax while paying their salary. Say, the total amount you have deducted is 20,000/- in a month. You will have to pay this to the government within 7th of next month. For this payment you will use your TAN no. Now this money sits in your TAN account. The Income Tax department does not know from whom you have deducted this amount. For this allocation / tax crediting to happen, you will have to file eTDS returns every quarter, giving the PAN no of deductee / employee and based on this the money sitting in your TAN account is allocated / transferred to your employees. You will have issue the TDS certificate in form 16 to those employees confirming credit of the money to their PAN account.

Hope I was able to shed some light on the matter.





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