TAN (Tax Deduction Account Number)

What is TAN (Tax Deduction Account Number)?

TAN follows a fixed format: four letters, five digits, one letter. The first three letters denote the city, the fourth letter is the first letter of the deductor's name. Once issued, TAN stays with the entity for life. Under Section 203A, every person who deducts or collects tax at source must apply for and quote TAN in all TDS-related documents. This includes Form 24Q (salary), Form 26Q (other payments), TDS challans (ITNS 281), and the Form 16 they issue to employees. Failure to apply for TAN attracts a ₹10,000 penalty. Quoting the wrong TAN on a challan can mean the deposit doesn't reach the right account, employees see no credit in 26AS, and the employer faces interest and notices. Most companies set up TAN once during incorporation and don't think about it again, but multi-state employers sometimes need separate TANs for branch offices.

Example

Indian HRM Pvt Ltd has TAN BLRC12345A. Every monthly TDS challan and quarterly 24Q quotes this TAN. Employees see this TAN on their Form 16 Part A. If a payroll team accidentally uses last year's TAN, all their employees' 26AS shows missing TDS for that quarter.

How TAN (Tax Deduction Account Number) is used

Payroll software stores the company TAN in master data and auto-fills it on all TDS challans, 24Q files, and Form 16s. Multi-entity setups need TAN per entity to keep filings clean.

TAN (Tax Deduction Account Number) FAQs

What is the difference between PAN and TAN?

PAN identifies the taxpayer (employee or company). TAN identifies the entity that deducts tax. A company has its own PAN as a taxpayer and a TAN as a deductor.

Can a small business deduct TDS without TAN?

No. TAN is mandatory for any TDS deduction. The only exception is TDS on property purchase under Section 194-IA, where the buyer can use PAN.

Do I need separate TANs for branches?

You can use one TAN if all branches deduct under one head. But for compliance ease, many employers apply for branch-specific TANs.