Tax Deduction Account Number (TAN)

By Manu Rao | Updated March 2026

What Is TAN?

A Tax Deduction Account Number (TAN) is a unique 10-digit alphanumeric identifier issued by the Income Tax Department to entities responsible for deducting or collecting tax at source. If your company pays salaries, rent, professional fees, or makes any payment that attracts TDS, you need a TAN.

TAN is distinct from PAN. PAN identifies the taxpayer. TAN identifies the tax deductor. Every Indian company that makes payments subject to TDS must have both.

TAN Structure

A TAN follows the format: DELB12345A

• Characters 1-3 — City code of the TAN office (DEL for Delhi, MUM for Mumbai, CHN for Chennai)
• Character 4 — First letter of the entity's name
• Characters 5-9 — Sequential 5-digit number
• Character 10 — Alphabetic check digit

Legal Basis

• Section 203A of the Income Tax Act 1961 — Every person who deducts or collects tax at source must apply for TAN
• Section 203A(2) — TAN must be quoted on all TDS challans, certificates, returns, and correspondence
• Section 272BB — Penalty of INR 10,000 for failure to apply for TAN or quoting incorrect TAN
• Rule 114A — Prescribed form and procedure for TAN application

Who Needs TAN?

Any entity that is required to deduct tax at source needs a TAN. This includes:

• Private Limited Companies and Public Companies
• LLPs
• Government departments and agencies
• Proprietorship firms and partnerships (when TDS liability arises)
• Individuals and HUFs (when covered under tax audit or as employers)

For a foreign-owned Indian company, TAN is needed from the moment you hire your first employee or make any payment covered under Sections 192-196D.

TAN for Foreign-Owned Companies

Here is what makes TAN different when a company has foreign ownership:

• Obtained at incorporation — Like PAN, TAN application is now embedded in the SPICe+ (INC-32) incorporation form. When you incorporate through the MCA portal, TAN is allotted automatically.
• Required for Section 195 payments — Every payment to a non-resident (the foreign parent, overseas vendors, foreign consultants) requires TDS under Section 195. The TAN is used on the challan when depositing this TDS.
• Form 27Q filing — TDS on payments to non-residents is reported in Form 27Q (not Form 26Q used for domestic payments). Your TAN is the filing identifier.
• Multiple TANs — If your company has branches in different cities that independently deduct TDS, each branch may need a separate TAN. However, most private companies centralize TDS from one location and need only one TAN.

Application Process

During Company Incorporation (Automatic)

TAN is applied for within the SPICe+ form itself. No separate application is needed. The allotment letter arrives by email within 3-5 days of incorporation.

Separate Application (if needed)

1. Apply online — Visit the NSDL TIN website and select "Online Application for TAN (Form 49B)"
2. Fill Form 49B — Enter company name, PAN, address, responsible person details, and the category of deductor
3. Pay fees — INR 77 (including GST) for online applications
4. Submit — An acknowledgment number is generated. TAN is allotted within 5-7 working days.
5. Receive TAN allotment letter — Sent to the registered email and postal address

Using TAN — Where It Must Be Quoted

TAN vs PAN — Key Differences

Penalties

• Not applying for TAN — INR 10,000 under Section 272BB
• Not quoting TAN on challans or returns — INR 10,000 under Section 272BB
• Quoting incorrect TAN — INR 10,000 per instance
• Late filing of TDS return — INR 200/day under Section 234E (this is linked to TAN, as returns are filed per TAN)

The INR 10,000 penalty applies per default — so failing to quote TAN on 3 separate challans could theoretically attract INR 30,000 in penalties.

Common Mistakes

• Using PAN instead of TAN on TDS challans — This is surprisingly common. The challan (Form 281) has a specific field for TAN. Entering PAN here means the payment is not linked to your TDS account, and the credit does not reflect in the deductee's Form 26AS.
• Not obtaining TAN before the first TDS payment — Some companies start operations and pay salaries or rent before obtaining TAN. Without TAN, you cannot deposit TDS, which creates an immediate penalty situation.
• Having duplicate TANs — If TAN was obtained during incorporation and the company secretary separately applies for one, you end up with two TANs. Only one should be active — the other must be surrendered.
• Not updating TAN after company name change — When a company changes its name, the TAN must be updated using the TAN Change Request form. Mismatched names cause issues with TDS return filing.
• Not quoting TAN on Form 15CA — When making foreign remittances, Form 15CA requires the deductor's TAN. Missing this field leads to form rejection on the e-filing portal.

Practical Example

An NRI from the UAE incorporates a Private Limited Company in Gurgaon through SPICe+. Along with the Certificate of Incorporation, PAN, and CIN, the company receives its TAN — say, GRGB00123A. In the first month, the company hires 3 employees and pays rent of INR 30,000/month. The company deducts TDS on salaries (Section 192) and will deduct TDS on rent once the annual total exceeds INR 2,40,000 (Section 194I). All TDS is deposited using Challan 281, quoting the TAN. Quarterly, the accountant files Form 24Q (salary TDS) and Form 26Q (non-salary TDS) using the same TAN. When the company starts paying consulting fees to a Dubai-based marketing firm, Form 27Q is filed — again using TAN GRGB00123A.

Related Terms

• PAN — Tax identity of the entity itself
• TDS — The tax that TAN is used to track
• Form 15CA/15CB — Foreign remittance form requiring TAN
• Income Tax Return — Filed using PAN, not TAN

Beacon Filing obtains and manages TAN compliance for foreign-owned companies. Get in touch for TDS filing support.