One of the unfortunate aspects of doing business in India is that companies however small they might be, have to go through several registrations that include Permanent Account Number (PAN) registration, service tax registration, value added tax registration and shops and establishments act amongst others. Most businesses in India having local vendors would also have to register for a TAN number.
A TAN number actually stands for Tax Deduction and Collection Account Number. In India, when paying certain vendors or service providers, companies have to deduct something called as Tax Deducted at Source. Without getting into specifics of what is Tax Deducted at Source, you need to understand that you have to deduct a certain amount from an invoice payment and then later file these amounts collected with the government as prepaid taxes. Not doing so can attract huge penalties and create compliance issues for business managers. If you do not apply for a TAN number, then you cannot file Tax Deducted at Source returns with authorized banks or government agencies.
To apply for a TAN number, you have to approach the National Securities Depositories Limited (NSDL). Although the easiest way to apply for the TAN number is to visit the NSDL website, the process is not 100% online. You have to first fill and submit the Form No. 49B at the website after which you will be provided with an acknowledgment screen containing a 14 digit number and other information. You must take several print outs of this screen and this must be posted to the specified address of NSDL immediately. Make sure to sign at the designated area and send a cheque or demand draft for the payment for TAN number. If you wish, you can also pay via credit card or via net banking. If choosing to pay online, ensure you payment status appears as paid in the acknowledgment screen.
Once you have completed the entire procedure and sent payment along with the duly signed acknowledgment form, you should get your TAN number within two weeks. Once obtained, you need to consult with a qualified CA on when you should collect tax deducted at source and how it affects your company. Also TDS returns and payments should be filed with authorized banks before the deadline for each year and this is as important as filing your own company tax returns on time. TAN number must also be quoted for all communications with the Income Tax department regarding TDS.