Tax Deduction Account Number (TAN) is a one of its kind 10 digit alpha-numeric code allotted by the Income Tax Department to all those persons who are required to deduct tax at the source of income. It is mandatory to quote TAN on all TDS returns or any TDS imbursement challan. These applications are digitized by NSDL and forwarded to the Income Tax Department like the PAN applications. The Income Tax Department will issue the TAN, which will be closed to NSDL online. On the foundation of this, NSDL will issue the TAN letter to the applicant.
As per Section 203A of the Income Tax Act, 1961, every person who deducts or collects tax at source has to apply for the allotment of TAN. Section 203A also makes it mandatory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan, TDS/TCS certificates and other documents as may be prescribed. Failure to apply for TAN or not quoting the TAN in the specified documents attracts a penalty of Rs. 10,000/-.
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