In a forward-looking initiative aimed at promoting accountability and transparency, the Income Tax Department has announced plans to introduce a compliance rating system for TAN (Tax Dedication and Collection Account Number) holders. This proposed system will evaluate the performance of tax deductors and collectors based on timely TDS/TCS filings, accuracy of data, adherence to payment deadlines, and response to departmental notices. The move is part of a larger framework to encourage voluntary compliance and improve the overall integrity of the tax deduction ecosystem.

According to officials, the upcoming TAN Compliance Rating will be algorithmically generated using data from the TRACES portal, NSDL filings, and historical compliance behavior. Each TAN holder—be it a corporate entity, government department, educational institution, or NGO—will be rated on parameters such as quarterly return submissions, PAN-TAN consistency, correction filings, and challan reconciliation. The rating may be displayed on the TRACES portal and could influence a deductor’s ability to access certain benefits or fast-track processing of refunds and clearances.

The department has clarified that the system will also offer advisories and improvement suggestions for entities with lower ratings, allowing them to improve their compliance standing. Tax professionals and corporate advisors have welcomed the concept, noting that it introduces a performance-based incentive structure that can reduce scrutiny for consistently compliant TAN holders. The government is expected to roll out a beta version of the rating tool in the coming months, and TAN holders are urged to review their records and ensure full compliance to benefit from the system.