Verification of TDS and TCS Compliance

• During financial auditing, TAN is used to verify that the entity has complied with tax deduction and collection requirements.
  
• Auditors review whether TDS/TCS has been properly deducted, deposited, and reported using the correct TAN.
  
• It ensures that tax liabilities arising from salaries, rent, contractor payments, or commissions are legally recorded and executed.
  

Cross-Check with Tax Returns

• TAN is referenced to validate the TDS returns filed (Forms 24Q, 26Q, 27EQ, etc.) against the books of accounts.
  
• Auditors confirm that the returns were filed timely, contain accurate figures, and match with the general ledger.
  
• Any discrepancy between the financial statements and TAN-based tax filings is noted as a compliance risk.
  

Reconciliation with Form 26AS

• TAN facilitates the reconciliation of TDS amounts deducted by the entity with the credits reflected in Form 26AS of deductees.
  
• Auditors match the company’s challans and deductions with acknowledgments and government records.
  
• This step ensures that deductees receive proper credit and prevents disputes or audit qualifications.
  

Disclosure in Audit Reports

• TAN is disclosed in the Tax Audit Report (Form 3CD), particularly under Clause 34, which deals with TDS and TCS compliance.
  
• The report includes:
  
  • TAN details
    
  • Nature and section of deductions
    
  • Amount deducted and paid
    
  • Any delays or defaults with interest or penalties
    
• This disclosure is legally binding and critical for both internal governance and statutory audit purposes.
  

Indicator of Financial Discipline

• A properly used TAN is a sign of systematic financial control and tax discipline within the organization.
  
• Auditors assess whether the entity’s accounting and finance team follows correct processes for deduction, payment, and filing.
  
• Errors or omissions related to TAN often signal larger weaknesses in financial management or regulatory compliance.