TAN
What TAN means, how it works, a worked example, the mistakes we see and the questions founders ask.
DefinitionA Tax Deduction and Collection Account Number (TAN) is the 10-character number every business that deducts or collects tax at source must hold and quote on TDS payments, returns and certificates.
The moment you pay a salary, rent, professional fees or contractor bills above the threshold, you must deduct TDS, and you cannot deposit or report it without a TAN. Companies receive a TAN automatically with the Certificate of Incorporation; proprietors, firms and LLPs apply through Form 49B on the NSDL or income tax portal for a small fee, and it arrives in about a week. One TAN covers all branches unless you want separate ones. You meet it on every TDS challan, on the quarterly 24Q and 26Q returns, on Form 16 and 16A, and on the TRACES portal login. What it means for you: deducting tax without a TAN, or quoting a wrong one, means the credit does not reach the payee's Form 26AS, and there is a penalty for not applying when required.
How TAN works
TAN is allotted under Section 203A to any person required to deduct tax at source under Chapter XVII-B or collect it under Section 206C. The ten characters read as four letters (three for the issuing region and one from the applicant's name), five digits and a check letter, for example MUMA12345B. A company incorporated through SPICe+ receives its TAN with the certificate of incorporation; anyone else applies on Form 49B online through Protean (formerly NSDL) with a fee of about ₹77 including GST, and the allotment arrives in about a week.
The TAN must be quoted on every TDS challan, on the quarterly statements in Forms 24Q, 26Q and 27Q, on Forms 16 and 16A, and in correspondence with the TDS officer. It is also the login for the TRACES portal, where certificates are downloaded and defaults are seen. The number stays with the business; a change of name or address is updated through a correction application on the same form.
Two deductions do not need a TAN: tax on purchase of immovable property above ₹50 lakh under Section 194-IA, paid on Form 26QB with the buyer's PAN, and tax on rent above ₹50,000 a month by an individual not under audit under Section 194-IB, paid on Form 26QC. Everything else, from salary to contractor payments, requires one. A business with several branches may take one TAN per branch if each files its own returns, but a single TAN is simpler.
A Mumbai design studio run as a proprietorship hires its first employee at ₹60,000 a month in June 2026 and takes an office at ₹55,000 a month. Both payments cross the TDS thresholds, so the owner files Form 49B on 2 June, receives TAN MUMD45678K on 9 June, deducts tax from the June salary and rent, deposits it by 7 July and files the first 24Q and 26Q by 31 October.
Mistakes we see with TAN
- Quoting the PAN in place of the TAN on a challan, which parks the payment where no TDS return can claim it and needs a challan correction.
- Applying for a second TAN after misplacing the first, when holding more than one is an offence and the duplicate must be surrendered.
- Deducting tax for months before the TAN arrives and failing to deposit it, because the challan cannot be filed without a number; the interest meter runs from the deduction date.
- Not applying at all and paying contractors gross, which exposes the business to Section 272BB's ₹10,000 penalty and a 30% disallowance of the expense.
Last updated 19 October 2026. Checked against the MCA, GST, Income-tax and Trade Marks rules in force for October 2026.
Where you will meet this term
Questions founders ask about TAN
Does a new private limited company need to apply for a TAN?
No. The SPICe+ incorporation form applies for PAN and TAN together, and both numbers are printed on the certificate of incorporation. LLPs incorporated through FiLLiP also receive both; proprietorships and partnership firms apply separately on Form 49B.
What is the penalty for not having a TAN?
Section 272BB provides a penalty of ₹10,000 for failing to apply for a TAN when required, or for quoting a wrong one. The larger cost is practical: without a TAN, deducted tax cannot be deposited or reported, so interest accrues and the payee's credit never appears.
Can I surrender a TAN if the business no longer deducts tax?
Yes. A request to cancel is made through the TAN correction form on the Protean portal after all returns are filed. A business that merely has no deductions in a quarter does not need to surrender; it can file a nil declaration on TRACES instead.