Indian Income Tax Law | TDS and TCS compliance

Section 203A: Tax Deduction and Collection Account Number (TAN)

Section 203A of the Income-tax Act, 1961 required persons deducting tax at source (TDS) or collecting tax at source (TCS) to obtain and quote a Tax Deduction and Collection Account Number (TAN), subject to statutory exceptions. From 1 April 2026, the corresponding provision is Section 397(1) of the Income-tax Act, 2025.

1. What is a Tax Deduction and Collection Account Number?

TAN is a unique 10-character alphanumeric identification number issued by the Income Tax Department to persons responsible for deducting TDS or collecting TCS. It identifies the deductor or collector in tax-payment challans, periodic statements, certificates and other prescribed communications.

TDS means tax deducted by a payer from a payment to a recipient where required by law. TCS means tax collected by a seller or another specified collector in transactions covered by the applicable provisions. PAN identifies a taxpayer; TAN identifies the deductor or collector for withholding compliance. A PAN does not generally replace a TAN except where law specifically permits.

2. Section 203A of the Income-tax Act, 1961: legal requirements

Sub-section (1): obligation to apply

A person deducting or collecting tax under the relevant provisions who has not been allotted a tax deduction account number, tax collection account number or combined TAN must apply for allotment within the prescribed period. Under the earlier framework, the prescribed deadline was within one month from the end of the month in which tax was deducted or collected, subject to the applicable rules and exceptions.

Sub-section (2): where TAN must be quoted

Once allotted, TAN is to be quoted in the prescribed tax-payment challans, TDS/TCS certificates, TDS/TCS statements and returns, and other documents specified for tax administration. These requirements enable correct matching of payments and statements with the deductor or collector.

Sub-section (3): notified exceptions

The Central Government may notify classes of persons to whom the provision does not apply. Separate statutory exceptions also apply to specified withholding transactions; therefore, a person should check the provision governing the particular payment before applying for TAN.

3. Section 397(1) under the Income-tax Act, 2025

With effect from 1 April 2026, Section 397(1) is the corresponding provision governing allotment and use of TAN. The legal obligation continues for deductors and collectors generally, but the statutory exceptions and procedural rules must be read under the new Act and the Income-tax Rules, 2026 for transactions governed by that regime.

Where an existing TAN has already been allotted, the same TAN generally serves both deduction and collection functions. A separate TAN solely for TCS is not ordinarily needed.

4. When is TAN not required?

Some special transactions allow deduction using PAN rather than obtaining TAN. Examples under the 1961 Act included specified payments governed by Sections 194-IA, 194-IB and 194M, subject to their statutory conditions. The 2025 Act has its own exclusions under Section 397(1), including the relevant prescribed withholding arrangements.

Important change from 1 October 2026: The Income Tax Department's guidance states that a resident individual or HUF purchasing immovable property from a non-resident seller may use the designated challan-cum-statement mechanism without obtaining TAN, subject to the conditions of the new provision. This should not be confused with a general exemption for every purchase from a non-resident or every non-resident payment.

5. TAN application and compliance procedure

1. Identify the obligation: Determine whether the business, employer, government office or other payer must deduct or collect tax.
2. Check exemptions: Verify whether the transaction qualifies for PAN-based challan-cum-statement compliance.
3. Apply in the correct form: Under the 2026 Rules use Form 134 for a government applicant and Form 135 for a non-government applicant, following the current official instructions.
4. Verify allotment: Use the Income Tax Department's Know TAN Details facility.
5. Quote TAN accurately: Include it in the applicable tax challans, TDS/TCS statements and certificates, except in a permitted PAN-based process.
6. Maintain records: Reconcile tax payments and statement acknowledgments, and correct any TAN mismatch promptly.

The e-Filing portal provides separate payment flows for the two Acts. For example, its TAN-login challan guidance distinguishes the older ITNS 281 from ITNS 281N for the 2025 Act. Select the appropriate Act and tax year when paying.

6. Consequences of not obtaining or correctly quoting TAN

Failure to obtain or quote TAN when legally required may attract a statutory penalty and may prevent or disrupt payment, statement filing and issue of certificates. Under the earlier Act, Section 272BB provided for a penalty of Rs. 10,000 for specified TAN failures, subject to the applicable statutory safeguards. For transactions governed by the 2025 Act, the corresponding current penalty provisions should be checked separately rather than assuming that the old section number continues.

Where TDS or TCS is also not deducted, collected or deposited as required, separate interest, default and other consequences may arise under the relevant provisions. Obtaining TAN does not by itself satisfy the duty to deduct, deposit and report tax.

7. Practical examples

Example A: Company deducting salary TDS

A private company paying salaries subject to TDS ordinarily requires TAN. It uses TAN for the relevant withholding payment, statement and employee certificate processes.

Example B: Buyer of property from a resident seller

A qualifying individual buying immovable property from a resident seller may be able to use the specific PAN-based challan-cum-statement mechanism rather than obtaining TAN, provided the conditions of the relevant withholding provision are met.

Example C: Resident individual buying property from a non-resident seller

For a transaction covered by the special mechanism effective 1 October 2026, the resident individual or HUF buyer may not need TAN. The buyer must still deduct and report tax correctly using the designated procedure.

8. Frequently asked questions

Is TAN the same as PAN?

No. PAN identifies the taxpayer; TAN is the withholding compliance identifier for a person responsible for TDS or TCS. Specific exceptions allow PAN-based reporting.

Does every individual deducting tax need TAN?

No. It depends on the nature of the transaction and whether the relevant provision requires TAN or provides an exemption.

Is a separate TAN required for TCS if the payer already has TAN for TDS?

Ordinarily no. The allotted TAN is used for both TDS and TCS compliance.

What forms replaced Form 49B from April 2026?

Form 134 for government applicants and Form 135 for non-government applicants under Rule 216 of the Income-tax Rules, 2026.

9. Official legislation and guidance

• Income-tax Act, 1961, as amended by Finance Act, 2025 (official PDF)
• Official provision mapping: Section 203A to Section 397(1)
• Income Tax Department: Forms 134 and 135 TAN application FAQs
• Income Tax Department: Know TAN Details
• Official guidance: property transfer involving non-resident seller, Form 141 Schedule E

Editorial note: This article explains the general statutory framework as at 27 October 2026. Always verify applicable notifications, amendments, rules and portal instructions for the transaction date and tax year. It is general legal information, not transaction-specific advice.