What Is TAN and How to apply for TAN?


1) What Is TAN and How to apply for TAN?

TAN stands for Tax Deduction Account Number. It is 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. Under Section 203A of the Income Tax Act, 1961, it is mandatory to quote Tax Deduction Account Number (TAN) allotted by the Income Tax Department (ITD) on all TDS returns. The procedure for application of TAN is very simple and can be done online by filling up Form 49B.


2) What is TDS Certificate?

TDS certificates are issued by the deductor (the person who is deducting tax) to the deductee (the person from whose payment the tax is deducted). There are mainly two types of TDS certificates issued by the deductor.
1.Form 16: which is issued by the employer to the employee incorporating details of tax deducted by the employer throughout the year, and
2. Form 16A: which is issued in all cases other than salary.


3) When TDS should be deducted?

The concept of TDS is based on a simple principle i.e. tax is to be deducted at the time of payment getting due or actual payment whichever is earlier.


4) How much tax should be deducted from salary?

Persons responsible for paying salary are liable to deduct tax on estimated salary at prescribed rate of 15% subject to following: 1. Exemption Limit: No tax is required to be deducted at source unless the estimated salary exceeds basic exemption limit. 2. Exempt allowances: Allowances such as LTC, HRA, conveyance, travelling exempt as per prescribed limits and other perquisites not forming part of salary should be deducted from total salary while calculating taxable salary. 3. Other deductions: Other deductions such as deductions under section 80C, 80CCC, 80CCD, 80CCG, 80D, 80DD, 80DDB, 80E, 80EE, etc. should be considered before the calculation of tax on salary.


5) What is the minimum salary one should have for TDS to be deducted by the employer?

If after comprehensive calculation of allowable allowances, taxable perquisites and deductions under chapter VI-A, income from salary head exceeds a sum of basic exemption limit, then tax has to be deducted by the employer @ 15% on the amount over and above the basic exemption limit. For example, the salary of Mr. A arrives at Rs 2,80,000/- assuming that all the allowances, perquisites, and deductions have been taken into consideration, tax @ 15% on Rs 30000/- (2,80,000 – 2,50,000) shall be deducted by the employer.
Hence, provisions of TDS shall attract only if minimum salary is above the basic exemption limit.

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