Introduction

E-commerce businesses in India operate within a highly regulated financial environment, where tax compliance is critical to legal and operational integrity. Among the key tax identifiers required by law is the Tax Deduction and Collection Account Number (TAN), mandated under Section 203A of the Income Tax Act, 1961. For e-commerce platforms—such as online marketplaces, service aggregators, or digital retailers—TAN is not merely an administrative code but a legal instrument essential for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) compliance. Given the unique nature of e-commerce transactions involving multiple sellers, service providers, and commission models, the responsibilities linked to TAN are both extensive and critical.

Deduction of Tax at Source on Commission and Payments

E-commerce operators are often required to deduct TDS on payments made to third-party service providers, delivery partners, warehousing contractors, content creators, and affiliates. For example, under Section 194H, tax must be deducted on commissions paid to sellers or affiliates. TAN is used as the official deductor identifier in all such TDS transactions. The e-commerce company must ensure that each deduction is linked to its valid TAN and that the deducted tax is deposited to the government within the stipulated timeline. Failure to quote or use TAN in these cases would make the deduction and subsequent return filing non-compliant.

TCS Obligations Under Section 52

Under Section 52 of the CGST Act and Section 206C(1H) of the Income Tax Act, e-commerce businesses are also liable to collect tax at source on sales facilitated through their platforms. This especially applies to online marketplaces that collect payments on behalf of sellers and remit the net amount after deductions. The collected TCS must be reported and deposited using the e-commerce operator’s TAN. Every remittance to a seller must be traceable to TCS entries that are filed and certified under the TAN, ensuring accountability and enabling sellers to claim tax credit.

Quarterly Return Filing and Certificate Generation

E-commerce platforms must file quarterly TDS and TCS returns using TAN. These filings include Form 26Q for non-salary payments and 27EQ for TCS transactions. These returns must contain accurate details of all deductees and collectees, the tax amounts, challan details, and transaction records—all linked to the e-commerce operator’s TAN. The platform is also responsible for generating and issuing TDS and TCS certificates (Form 16A or Form 27D) to vendors and partners. These certificates must carry the correct TAN, allowing recipients to claim tax credits and reconcile their tax records.

PAN-TAN Matching and Reporting Accuracy

To ensure that the tax deducted or collected is correctly reflected in the seller’s or partner’s Form 26AS, the e-commerce business must carefully match PAN and TAN data during TDS/TCS reporting. Any mismatch can result in tax credit not being assigned to the recipient, which can lead to disputes and penalties. TRACES and other tax compliance platforms rely on the accuracy of TAN for verification, making it essential for e-commerce platforms to maintain strict data hygiene in their tax deduction and reporting processes.

Compliance with TRACES Portal Functions

E-commerce platforms must be registered on the TRACES portal using their TAN to access essential features like downloading justification reports, filing correction returns, viewing defaults, and generating official TDS/TCS certificates. Regular use of the portal ensures real-time compliance tracking and helps avoid defaults related to short deductions, late payments, or incorrect data entries.

Due Diligence in Vendor Onboarding and Disclosures

During vendor onboarding, e-commerce platforms are expected to disclose their TAN and also collect PAN details from sellers to comply with TDS and TCS rules. Proper documentation and declaration forms ensure that tax deductions and collections are lawfully carried out and accurately linked to the correct identities. Failure to adhere to these processes may result in audit flags, incorrect tax credits, or legal notices from the Income Tax Department.

Conclusion

TAN responsibilities for e-commerce businesses are wide-ranging and essential to lawful operations. From deducting and collecting taxes at source to filing returns, issuing certificates, and ensuring credit flow to sellers, the use of TAN is deeply embedded in the tax compliance architecture of digital commerce. In a sector where hundreds or thousands of vendors and transactions are processed daily, meticulous handling of TAN-related obligations not only ensures compliance but also strengthens trust with sellers, customers, and tax authorities. For e-commerce platforms, TAN is more than a statutory number—it is the cornerstone of financial governance and tax accountability in a digital economy.

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