Introduction

Non-profit organizations in India—including charitable trusts, NGOs, educational institutions, religious bodies, and societies—are generally established with the primary purpose of public welfare rather than profit generation. While these entities may enjoy exemptions under various provisions of the Income Tax Act, 1961, they are not exempt from compliance obligations related to tax deduction at source (TDS). One such statutory requirement is the Tax Deduction and Collection Account Number (TAN), which is essential for any organization that is required to deduct or collect tax at source, regardless of its profit orientation.

TAN, introduced under Section 203A of the Income Tax Act, is a unique 10-character alphanumeric number allotted by the Income Tax Department. It is mandatory for all entities, including non-profits, that make payments which attract TDS provisions—such as salaries, contractual fees, professional services, rent, or consultancy payments.

TAN and TDS Obligations for Non-Profits

Although non-profits may not be liable to pay income tax on their earnings (subject to certain conditions and exemptions), they are often involved in financial transactions that are taxable in the hands of the recipient. For example, a non-profit that hires a consultant, rents office premises, or pays honorariums above the specified threshold limits must deduct tax at source on these payments and deposit the same with the government. In order to do this legally and traceably, the organization must apply for and quote TAN in all related filings and payments.

Application and Use of TAN

Non-profit entities can apply for TAN using Form 49B, either online through the NSDL/Protean portal or offline at designated TIN Facilitation Centres. The application should be made in the name of the trust or society, using the entity’s Permanent Account Number (PAN) and including details of the authorized person responsible for compliance. Once TAN is allotted, it becomes the official identifier for all TDS-related activities.

The organization must then use TAN while:

• Depositing TDS through Challan No. 281
  
• Filing quarterly TDS returns (Forms 24Q, 26Q, etc.)
  
• Issuing TDS certificates (Form 16A)
  
• Registering on the TRACES portal for certificate generation and corrections
  

Legal and Operational Significance

For non-profits, compliance with TAN and TDS provisions is not merely a formality—it reflects good governance, financial discipline, and legal accountability. Donors, regulatory authorities, and auditors expect NGOs and trusts to handle their financial responsibilities transparently. Non-compliance with TAN regulations can lead to penalties under Section 272BB, disallowance of expenses, and even questions about the organization’s tax-exempt status during audits.

Conclusion

Even though non-profit organizations operate with altruistic goals, they are not beyond the scope of tax deduction obligations under Indian law. The requirement to obtain and operate with TAN ensures that such entities play their role in maintaining tax transparency, especially in financial dealings that involve taxable recipients. By securing a TAN and adhering to TDS compliance norms, non-profits reinforce their commitment to lawful functioning, enhance credibility, and build trust with stakeholders, donors, and regulatory authorities alike. As financial scrutiny of non-profits continues to grow, TAN compliance becomes a vital aspect of institutional integrity and public accountability.

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