Introduction

The Tax Deduction and Collection Account Number (TAN) is a mandatory regulatory identifier issued by the Income Tax Department of India under Section 203A of the Income Tax Act, 1961. It is essential for all entities and individuals responsible for deducting or collecting tax at source. While TAN plays a vital role in strengthening tax traceability and transparency, ensuring full and accurate compliance with TAN obligations can be challenging for many deductors, especially in environments involving high-volume payments, multi-state operations, dynamic vendor bases, or frequent organizational changes. From administrative errors to systemic complexities, TAN compliance presents a range of operational, procedural, and legal hurdles.

Complexity in Obtaining and Managing Multiple TANs

For businesses with operations in multiple states or cities, managing more than one TAN becomes a significant task. Each branch or office that independently deducts TDS must obtain a separate TAN. This leads to challenges in tracking which TAN is applicable for each transaction, avoiding duplication, and preventing incorrect TAN usage across branches. Maintaining multiple TANs requires robust internal systems, careful mapping in ERP software, and centralized oversight, which many businesses struggle to implement effectively.

Administrative Errors in Filing and Quoting TAN

One of the most common challenges in TAN compliance is inaccurate data entry—particularly when quoting TAN in TDS returns, challans, or certificates. A single typographical error can lead to rejection of TDS returns, misallocation of TDS deposits, and denial of tax credit to deductees. If the wrong TAN is quoted in a TDS certificate or challan, the corresponding transaction may not reflect in the deductee’s Form 26AS, leading to disputes and loss of trust. Rectifying such errors requires submission of correction statements, which is time-consuming and may involve additional penalties.

Delays in TDS Deposits and Return Filings

TAN holders are required to deposit TDS by the 7th of each month and file quarterly TDS returns on fixed due dates. Managing this schedule alongside regular business operations is often difficult, especially in smaller organizations with limited compliance resources. Late payments or delayed filings attract interest under Section 201(1A) and penalties under Sections 234E and 271H, making timely compliance critical. Any oversight in meeting these deadlines can escalate into legal and financial complications.

Challenges with TRACES Portal and Digital Infrastructure

The TRACES portal, which facilitates return correction, TDS certificate generation, and statement downloads, requires accurate registration and secure use of TAN credentials. Many deductors face difficulties with portal navigation, system errors, and delays in correction approval. Technical glitches, poor internet connectivity, and limited user understanding of the portal’s functionalities can hinder smooth TAN-related compliance. Moreover, businesses must ensure that the correct digital signature certificates (DSCs) are mapped to the right TAN to avoid rejection of filings.

Mismatch and Reconciliation Issues with PAN and TAN

Ensuring that the TAN used for deduction matches the deductee’s PAN is critical for accurate credit reflection in the Income Tax Department’s systems. However, in practice, mismatches in PAN-TAN combinations—caused by incorrect data entry, lack of updated records, or wrong selection of deductor categories—can result in notices, correction requirements, and financial disputes. These issues not only affect the deductee’s ability to claim credit but also increase the deductor’s administrative burden during audits and assessments.

Handling Default Notices and Legal Follow-Ups

Even after diligent compliance, TAN holders may receive default notices for short deduction, late payment, or filing discrepancies. Responding to these notices within stipulated timeframes and preparing proper documentation for justifications can be a legal and logistical challenge. Many organizations fail to track these notices across different branches or misinterpret the requirements, leading to unresolved issues and escalated enforcement action from the tax authorities.

Inadequate Internal Coordination and System Integration

In organizations where finance, HR, and compliance teams operate in silos, the risk of TAN non-compliance increases. There is often lack of synchronization between departments when deducting tax, depositing payments, and filing returns. Disparate accounting systems, manual processes, or poorly integrated ERP platforms contribute to errors and inconsistencies, making it difficult to maintain accurate and up-to-date TAN records.

Conclusion

While TAN is a powerful tool in India’s tax ecosystem, its compliance requirements demand consistent diligence, strong internal controls, and technical capability. Businesses, government bodies, and non-profit organizations alike face challenges ranging from administrative errors and portal complexities to multi-location coordination and response to legal notices. Overcoming these challenges requires investing in robust systems, staff training, regular audits, and the adoption of digital tools that streamline compliance. As India’s tax administration becomes more automated and data-driven, proactive and accurate TAN compliance is not only a legal necessity but also a cornerstone of responsible financial governance.

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