TAN number is required to deduct TDS (tax deducted at source) by businesses (including online business) when they make specified payments such as
- Professional fees to freelancers & developers
- Salary to team members & employees
- Commission payments for selling products
- Rent payments in case you run a business on rented premises
If you are running an online business or are planning to start on online business then you need to know about the TAN.
Online businesses include a blog, e-commerce store, an affiliate marketing website, running a digital marketing agency, or doing any business using social media platforms or the internet.
In this article, you will come to know of the TAN, understand its requirement and the process to register for TAN and file TAN returns smoothly.
What is TAN Number
Tax Deduction Account Number or TAN is used by the government to identify tax deductors. TAN is similar to the Permanent Account Number (PAN) which is used by the government authorities to identify taxpayers.
TAN is also known as the Tax Collection Account Number. TAN is issued by the Income-tax Department and is a 10-digit alphanumeric number in a format AAAA12345A.
For example, the TAN number for an individual person named Mr. Anil of Mumbai may appear as MUM A 12345 G.
Importance of TAN
As per the Income Tax Act, any person who is paying a salary or professional fee needs to deduct taxes and submit it to the government.
For running your online business, if you are hiring a writer, social media manager, or any technical guy then before making salary or fee payment you need to deduct taxes.
TAN helps the government avoid tax evasion and is to be obtained by all persons who are responsible for deducting tax at source (TDS).
As per section 203A of the Income-tax Act, 1961, every person who deducts or collects tax at source needs to have a TAN number.
TAN is also required while submitting the following documents
- TDS statements/ return
- TCS statements/ return
- Statement of financial transactions or reportable accounts
Rates for TDS
For the present financial year (FY 2020-21) the applicable rates for TDS are as under. You are oblige to deduct TDS if you are making payment more than the exempt amount to one party.
For example, if you are supposed to pay below Rs 30,000 to your freelancers then TDS deduction is not mandatory.
|Nature of Payment||Maximum exempt amount||TDS Rate|
|Payment of salary||Rs. 2.5 Lakh||As per the normal slab rate|
|Payment for contract /sub-contract work||Rs. 30,000 for each contract or Rs. 1 Lakh in aggregate during the financial year.||If payment made to Individuals – 1%|
Payment made to others – 2%
|Rent||Rs. 2,40,000 p.a||10%|
|Fees for professional or technical services||Rs. 30,000 p.a.||Fees for technical services -2%|
Other sums – 10%
When TAN is Required for Online Business
There is no specific condition in the Income Tax Act for online businesses regarding when they have to apply for TAN.
All businesses including online businesses need to have TAN if you are making payments that include salary payment, rent payment or payment of technical & professional fees.
You need to take a declaration from the employee about his taxable income and exempted investments. If he is liable to pay income taxes then you need to deduct TDS before paying the salary.
Note – You do not need to have a different TAN for different types of payment such as salary payment, commission payment, etc. The TAN allotted by the Income Tax department for TDS can be used for deducting tax for different types of payments.
If you have just started building your blog, an e-store, or a website for affiliate marketing then you shouldn’t worry about the TAN.
If you are running your online business single-handedly then also you need not worry about TAN in the initial days.
Later, when you start earning a steady income and you happen to hire freelancers or team members to whom you need to pay fees/salary, then you should apply for TAN.
Till the time you are not making higher payments than the exempt amount for rents, salaries, commission, or professional fees there is no need to apply for TAN.
TAN Online Registration Process
The TAN number is allotted by the Income Tax Department based on the application submitted by you online at the NSDL-TIN website.
You can also register for TAN offline by filling up Form 49B in duplicate, attach the DD/cheque in respect of fees and submit it to the nearest TIN-FC.
TIN-FC is Tax Information Network Facilitation Centre (TIN-FC) managed by NSDL all over India to help people get information and services related to income tax.
Here, I will help you with the step by step online TAN registration process.
Documents Required for TAN
As such no documents are required to be submitted or uploaded at the time of making an online application for allotment of TAN.
However, you need to sign the acknowledgment that is generated after filling up the form and need to be forwarded to NSDL.
Step 1 – Visit NSDL-TIN Website
Click on the link to the NSDL-TIN website where you can start an online application for TAN.
Find the “Apply Online” tab on the left-hand side and click on the “New TAN” tab for online application form filling.
Step 2 – Start TAN Registration
Next, you will get a new page which is an online application for TAN (also known as form 49B). The page contains the detailed application procedure and the guidelines.
You can scroll down and go through the guidelines. At the bottom of the page, you will find the section where you first need to select the tax deductor category like the one shown below.
If you hold a digital signature certificate (DSC) then you can apply using the second option or else select the first option for TAN application.
Click on the drop-down menu and select ‘Individual’ if you are ruining your online business as a sole proprietorship.
If your online business is formed as a partnership firm or company then you need to select the relevant option.
Step 3 – Filling-up the TAN Form
The TAN application form will look like the one shown below.
If you know your tax “Assessing Officer” code details, then you can fill it directly or you can use the “Don’t know AO details” tool. The tool is on the top left corner of the application.
Select the city where your online business is situated or your principal place of business.
For example, I have selected “B” for Bhopal. The list of cities pops up. Select your city for knowing AO details.
Next, you will get the Assessing Officer Code and other details as shown under. Select one of the details by clicking on the radio button and then click on the submit button on the bottom of the page.
When you click submit the AO details automatically get filled in the TAN application form as shown below.
Scroll down to the section which is visible in black which is meant for individuals and HUF. The blue section is for other classes of tax deductors.
Select “Individual” and fill in your details like title, name, and surname in the space provided.
Scroll further down where you can fill in the
- Address details
- PAN details
Fill in the declaration space as shown above and get ready for the fee payment.
Step 4 – TAN Application Fee Payment
For the new TAN application, you need to pay Rs. 65 as fees. The fees can be paid through DD, cheque and net banking.
For quick online payment select the net banking option as shown below.
You can check the list of the banks available for net-banking payment. When you click the “Submit” button you will be taken to the bank’s net banking portal for fee payment.
After the fee gets paid you will get an acknowledgment that will be displayed on the screen.
The acknowledgment is a unique 14-digit number that you can use to track your TAN application till the new TAN gets generated in the name of your business.
Finally, you need to print a copy of the acknowledgment, sign it and send it to NSDL at the following address.
5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune – 411016.
For tax deductors, having a digital signature certificate can affix the DSC on the TAN application form before submitting the application.
Usually, it may take around 7-15 business days for the TAN number to get generated. NSDL will intimate the TAN number allotted to you over the email of the address specified in the application.
TAN Correction Online
If you find any discrepancies like incorrect name spelling or category of deductor in your TAN details then you can get it corrected online.
If there is a change in address then you can correct the new address in your TAN data online using the Tax Information Network (TIN) website.
For making any change or correction in the data related to TAN you need to fill up “Form for changes or correction in TAN data for TAN allotted”.
The changes in TAN can be made offline at any of the Tax Information Network Facilitation Centre (TIN-FCs).
For online TAN correction follow the below steps.
#1. Visit NSDL-TIN Website
Here is the link to the NSDL-TIN website for TAN correction. On the website click on the “Change/ Correction) tab for making changes as shown below.
The tab opens up in a new “Online Application for Changes Or Correction in TAN data for TAN allotted (TAN Change Request Form)” page. The page contains all the instructions for making changes to TAN.
#2. Select the TAN Change
On the TAN change request form scroll down to get the section from where you can start the process.
If you have a “Digital Signature Certificate” then opt for the second option. Otherwise, you can use the first option to make changes in TAN details.
Select your deductor category. If you are running your online business as a sole proprietorship then select ‘Individual’.
In case, if you are running your online business as a partnership firm or company then select the option according to your business constitution.
Click on the select tab to proceed with the change application.
#3. Fill TAN Change Request Form
Next, you will get the change request form similar to the online TAN registration form. Fill in the new details.
Make a payment of Rs. 65 online using net banking and click on the “Submit” button. The TAN change form gets submitted and it may take 7 to 15 days to get your correct TAN details updated.
How to Check Online TAN Status in India
Status of both the new application and TAN details change application can be checked online using the 14-digit acknowledgment number.
NSDL-TIN website advises that one should check online TAN status to be made after three days of the application.
#1. Visit TIN-NSDL Website
Visit TIN-NSDL website and click on the “Know Status of Your Application” tab.
#2. Select the Application Type
Next, you need to select the application type as “TAN- New/Change Request” and fill in the acknowledgment number.
Enter the captcha code and click on the “Submit” tab to get the TAN status.
How to File TAN Return in India
Follow the below steps to file TAN returns for your online business with the Income Tax department in an easy manner.
For filing TAN returns you must have a valid TAN. First, the TDS statements need to be prepared using the Return Preparation Utility (RPU) and then validated using File Validation Utility (FVU). Both tools are available on the income tax website.
Softwares are available in the market that will help you prepare your TAN returns. One such option is to use the Cleartax TDS return filing software.
#1. Login on the Income Tax Department Website
Visit the income tax filing portal for submitting the TAN returns online.
New users need to register on the portal using the tab “Register Yourself”. If you are already an existing user then you need to log in.
Select the “Tax deductor and collector” option from the drop-down menu and click continue.
Enter the TAN number, few basic details of your online business and your contact details.
Income tax department verifies the contact details using OTP and the account gets created online.
After the account has been created, log in by providing your TAN number as User ID, password and entering captcha as shown below.
#2. Select the Upload TDS Option
Once you have logged in, select the “Upload TDS” option from the TDS drop-down menu located on the top.
#3. Select the Statement Details
Fill in the TDS details using the Return Preparation Utility (RPU) and then select the statement as shown below.
After the details are entered, click on the validate tab to proceed with verification.
#4. Upload & Validate the TAN Return
TAN returns can be validated using the digital signature certificate (DSC) or electronic verification code (E-verify).
The e-verification can be done using your net banking, through bank account number, demat account and also through Aadhar OTP.
Upload the TAN file prepared on the utility by clicking on the “Upload TDS (zip) File” and attach the DSC. Click on the “Upload” tab to complete the TAN return filing.
TAN returns can also be validated using e-verify as shown below.
Click on the green “Click here to E-verify” tab and select one of the methods to e-verify TAN returns.
Once the TDS return is uploaded successfully, you will get a confirmation message and the details will also be sent on your email.
TAN number is mandatory for tax deduction at source and is required to be deposited to the Central government. There are penalties of Rs. 10,000 for not deducting and submitting TDS returns.
You should focus on growing your online business in the initial days.
Later when your online business grows big enough to employ people, pay professional fees and other payment then you should apply for TAN.