TAN or Tax Deduction and Collection Number (TAN) is mandatory 10 digit alpha number required to be obtained by all persons who are responsible for Tax Deduction at Source (TDS) or Tax Collection at Source (TCS) on behalf of the Government.
Tax deducted at source (TDS) ensures that the Government's collection of tax is proponed and the responsibility for paying tax is diversified. The person deducting the tax at source is required to deposit the tax deducted to the credit of Central Government.
Individuals who are salaried are not required to obtain TAN or deduct tax at source. However, a proprietorship business and other entities (i.e., Private Limited Company, LLP, etc.,) must deduct tax at source while making certain payment like salary, payments to contractor or sub-contractors, payment of rent exceeding Rs.1,80,000 per year, etc.
TDS means Tax Deducted at Source. It is the amount deducted from payments of various kinds such as salary, contract payment, commission etc. This deducted amount can be adjusted against the tax due of the deductee.
It is the duty of the person who is making payment to someone for specified goods or services to deduct TDS and file TDS return. The specified payment includes salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc. The person who deducts TDS is called deductor and the person whose tax is being deducted is called deductee.
TDS is not required to be deducted by Individuals and HUF except for those whose accounts are required to be audited u/s 44AB i.e. whose gross receipts in preceding financial year in case of business is more than 2 crore (AY 2017-2018) or 1 crore (AY 2016-2017) and in case of profession 50 lakhs (AY 2017-2018) or 25 lakhs (AY 2016-2017).
TAN is an alphanumeric 10 digit number required by a person who is liable to deduct TDS and file TDS return. Thus such person must make an application within a month of deducting TDS for allotment of Tax Deduction and Collection Number (TAN) in Form 49B. This number allotted is mandatory to mention in all TDS Certificates issued, returns, challans etc. If a person fails to apply for TAN he may be penalized up to Rs. 10,000/-.
Different types of TDS forms are as follows:
PAN of the deductor has to be given by Non-Government deductors. It is essential to quote PAN of all deductees.
Due dates of submission of quarterly TDS Return is 31st July for Q1, 31st October for Q2, 31st January for Q3, and 31st May for last quarter.
Payment can be made online on NSDL by selecting challan 281 and making the payment using net banking. These TDS payments need to be made before filing the TDS return.
E-payment is compulsory for all Corporate assesses & non-corporate assessees who are liable for audit u/s 44AB.
Physical payment can be made using Challan 281 in authorized bank branch.
Every person deducting tax as per provisions of section 203 is required to issue a certificate to the payee in respect of tax deducted by him along with certain other particulars. This certificate is called TDS Certificate. Even banks deducting TDS on pensions issue TDS certificates.
Types of TDS certificate to be issued in different cases:
Salaries: Certificate is to be issued in Form 16 containing details of TDS Payment, tax deducted at source and tax calculation based on which TDS was estimated. The certificate should be issued within 31st May of next financial year.
Non Salary Payments: Certificate is to be issued in Form 16A containing details of payment and tax deducted at source. The certificate should be issued within 15 days of due date of filing the return.
TCS: Certificate to be issued in Form 27D containing the Tax Collected & Paid details.
Failure to issue certificate will result in penalty of Rs. 100 for every day the failure continues but limited to the TDS amount.
It is a document which serves as an annexure to the intimation to be sent to the deductor. Intimation will be sent to the deductor through mail / post but a justification report will have to be downloaded from the portal.