Introduction

The Tax Deduction and Collection Account Number (TAN) is a critical component of India’s tax compliance system. Issued by the Income Tax Department under Section 203A of the Income Tax Act, 1961, TAN is required for any entity or individual responsible for deducting or collecting tax at source. While TAN streamlines tax collection and enables traceability, businesses of all sizes frequently encounter practical and procedural issues related to its usage, management, and compliance. These challenges can lead to delayed filings, financial penalties, and disruptions in business operations if not properly addressed.

Incorrect Quotation of TAN in TDS Returns

One of the most prevalent issues is the incorrect quoting of TAN in TDS returns. Whether due to typographical errors or administrative oversight, entering the wrong TAN during the preparation of Form 24Q, 26Q, or 27Q leads to rejection of the return by the Income Tax Department. Such errors can also result in non-reflection of TDS in the deductee’s Form 26AS, causing confusion, disputes, and credit mismatches. Inaccurate TAN entries require the filing of correction returns, which consume time and resources.

Using a Single TAN Across Multiple Locations Improperly

Many businesses operate across multiple states or cities and inadvertently use the same TAN across different branches, even when TDS is deducted independently. This creates jurisdictional confusion, incorrect mapping of TDS to the wrong location, and errors during assessments or audits. Although businesses are permitted to use a centralized TAN if deductions are made from a central location, misusing one TAN for decentralized operations can result in non-compliance notices and delayed reconciliations.

Late Deposits and Missed Deadlines

TAN holders must deposit TDS by the 7th of each month and file quarterly returns by the designated deadlines. Many businesses face challenges in keeping up with this strict schedule, especially if there are limited staff or manual accounting systems. Missing these deadlines leads to interest charges under Section 201(1A) and penalties under Section 234E and 271H. The failure to adhere to the monthly and quarterly compliance calendar due to poor tracking systems or administrative delays is one of the most frequent TAN-related compliance lapses.

Difficulties with TAN Correction and Updates

When a business changes its address, contact person, or organizational structure, it must update the same for TAN with the Income Tax Department. However, the process of TAN correction—which involves submitting a formal request along with supporting documents—is often time-consuming and misunderstood. Many businesses fail to initiate or complete the correction process promptly, leading to outdated information in government records. This can create problems during TDS return filings and when responding to departmental notices.

TRACES Portal Registration and Usage Complications

The TRACES portal is essential for TAN holders to download TDS certificates, file corrections, and track defaults. However, businesses often face difficulties in registering TAN on TRACES, especially when there are discrepancies between PAN-TAN combinations or mismatched address records. Even after registration, navigation issues, login credential problems, and system errors may hinder effective usage. Without access to TRACES, businesses cannot generate Form 16/16A or respond to TDS defaults, directly affecting compliance.

Issues with Multiple TANs for the Same Entity

Some businesses unknowingly or mistakenly obtain multiple TANs for the same branch or activity. This can happen when applying afresh instead of retrieving or updating an existing TAN. The use of duplicate TANs leads to confusion, fragmented filing records, and complexity during audits or reconciliations. The Income Tax Department advises that only one TAN per deductor per location should be used, and any additional or unused TANs should be surrendered.

Inadequate Internal Coordination Between Teams

In many organizations, finance, payroll, vendor management, and compliance departments function independently, leading to inconsistent use of TAN and misaligned record-keeping. For example, TDS may be deducted by one department, while the return is filed by another, resulting in mismatches or delays. Lack of centralized oversight often results in TAN being quoted incorrectly in vendor contracts, employee payslips, or official forms.

Lack of Awareness About PAN-TAN Linkage

Another common issue is the mismatch between the PAN of the deductee and the TAN of the deductor in TDS returns. This leads to defaults, short deduction notices, and denial of credit to the deductee. Many businesses fail to verify PANs accurately before processing payments and returns. This reflects poor compliance discipline and results in notices from the Income Tax Department requiring corrections and justifications.

Conclusion

Businesses frequently encounter a wide range of issues related to TAN usage and compliance, ranging from administrative mistakes and filing errors to more structural problems like misuse of TANs across locations and ineffective coordination among departments. These challenges can lead to compliance defaults, penalties, strained vendor relationships, and regulatory scrutiny. Addressing these issues requires automated systems, staff training, and centralized control mechanisms to ensure that TAN is used accurately and efficiently in all tax deduction and reporting activities. In a system where traceability and precision are paramount, strong TAN compliance is fundamental to responsible business practice.

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