Frequently Asked Questions For Tan
What is tax audit?
What is the objective of tax audit?
The dictionary meaning of the term "audit" is check, review, inspection, etc. There are various types of audits prescribed under different laws like company law requires a company audit, cost accounting law requires a cost audit, etc. The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession from the view point of Income-tax Law.
Section 44AB gives the provisions relating to the class of taxpayers who are required to get their accounts audited from a chartered accountant. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. The audit conducted by the chartered accountant of the accounts of the taxpayer in pursuance of the requirement of section 44AB is called tax audit.
The chartered accountant conducting the tax audit is required to give his findings, observation, etc., in the form of audit report. The report of tax audit is to be given by the chartered accountant in Form Nos. 3CA/3CB and 3CD.
As per section 44AB, who is compulsorily required to get his accounts audited, i.e., who is covered by tax audit?
One of the objectives of tax audit is to ascertain/derive/report the requirements of Form Nos. 3CA/3CB and 3CD. Apart from reporting requirements of Form Nos. 3CA/3CB and 3CD, a proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of accounts before the tax authorities and considerably save the time of Assessing Officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched for or not. The time of the Assessing Officers saved could be utilised for attending to more important and investigational aspects of a case.
If a person is required by or under any other law to get his accounts audited, then is it compulsory for him to once again get his accounts audited to comply with the requirement of section 44AB?
As per section 44AB, following persons are compulsorily required to get their accounts audited :
• A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore.
• A person carrying on profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.
• A person who is eligible to opt for the presumptive taxation scheme of section 44AD (*) but claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of section 44AD and his income exceeds the amount which is not chargeable to tax.
• If an eligible assessee opts out of the presumptive taxation scheme, after specified period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years thereafter.
(*) For provisions of section 44AD refer tutorial on “Tax on presumptive basis in case of certain eligible business”.
• A person who is eligible to opt for the presumptive taxation scheme of section 44ADA (*) but he claims the profits or gains for such profession to be lower than the profit and gains computed as per the presumptive taxation scheme and his income exceeds the amount which is not chargeable to tax.
(*) For provision of section 44ADA, refer tutorial on “Tax on presumptive basis in case of certain eligible business”
• A person who is eligible to opt for the presumptive taxation scheme of sections 44AE (*) but he claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of sections 44AE.
(*) For provisions of sections 44AE refer tutorial on “Tax on presumptive basis in case of certain eligible business”.
• A person who is eligible to opt for the taxation scheme prescribed under section 44BB (*) or section 44BBB (*) but he claims the profits or gains for such business to be lower than the profits and gains computed as per the taxation scheme of these sections.
(*) section 44BB is applicable to non-resident taxpayers engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire basis to be used in exploration of mineral oils. section 44BBB is applicable to foreign companies engaged in the business of civil construction or erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project.
What are Form Nos. 3CA/3CB and 3CD?
Persons like company or co-operative society are required to get their accounts audited under their respective law. Section 44AB provides that, if a person is required by or under any other law to get his accounts audited, then he need not again get his accounts audited to comply with the requirement of section 44AB. Is such a case, it shall be sufficient if such person gets the accounts of such business or profession audited under such law and obtains the report of the audit as required under such other law and also a report by the chartered accountant in the form prescribed under section 44AB, i.e., Form No. 3CA and Form 3CD (refer to next FAQ for relevance of these forms).
What is the due date by which a taxpayer should get his accounts audited?
The report of the tax audit conducted by the chartered accountant is to be furnished in the prescribed form. The form prescribed for audit report in respect of audit conducted under section 44AB is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD.
In case of persons covered under previous FAQ, i.e., who are required to get their accounts audited by or under any other law, the form prescribed for audit report is Form No. 3CA and the prescribed particulars are to be reported in Form No. 3CD.
What is the penalty for not getting the accounts audited as required by section 44AB?
A person covered by section 44AB should get his accounts audited and should obtain the audit report on or before the due date of filing of the return of income, i.e., on or before 30th September (*) of the relevant assessment year, e.g., Tax audit report for the financial year 2013-14 corresponding to the assessment year 2014-15 should be obtained on or before 30th September, 2014.
(*) In case of a taxpayer who is required to furnish a report in Form No. 3CEB under section 92 in respect of any international transaction or specified domestic transaction, the due date of filing the return of income is 30th November of the relevant assessment year.
The tax audit report is to be electronically filed by the chartered accountant to the Income-tax Department. After filing of report by the chartered accountant, the taxpayer has to approve the report from his e-fling account with Income-tax Department (i.e., at www.incometaxindiaefiling.gov.in).
What is TAN?
According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB, the Assessing Officer may impose a penalty. The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such year or years.
(b) Rs. 1,50,000.
However, according to section 273B, no penalty shall be imposed if reasonable cause for such failure is proved.
Who must apply for TAN?
TAN i.e. Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting tax at source or collecting tax at source. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan, TDS/TCS certificates, Annual Information Return and other documents as may be prescribed.
Why is it necessary to have TAN?
Every person liable to deduct tax at source or collect tax at source is required to obtain TAN. However, a person required to deduct tax under section 194IA (*) can use PAN in place of TAN as such person is not required to obtain TAN.
(*) Section 194IA provides for deduction of tax at source from payment on transfer of certain immovable property other than agricultural land.
How to apply for TAN?
As per section 203A of the Income-tax Act, 1961, every person who deducts or collects tax at source has to apply for the allotment of TAN. Section 203A also makes it mandatory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan, TDS/TCS certificates and other documents as may be prescribed. As per section 272BB, failure to apply for TAN or not quoting the TAN in the specified documents attracts a penalty of Rs. 10,000/-.
Who will allot TAN?
There are two modes for applying for TAN: (1) Online mode and (ii) Offline mode, they are as follows:
OFFLINE —An application for allotment of TAN is to be filed in Form 49B in duplicate and submitted to any TIN Facilitation Centres (TIN-FC). Addresses of TIN-FCs are available at NSDL-TIN website (https://www.tin-nsdl.com).
In case of an applicant, being a company which has not been registered under the Companies Act, 2013, the application for allotment of Tax Deduction Account Number may be made in Form No. INC-7 specified under sub-section (1) of section 7 of the said Act for incorporation of the company.
ONLINE —Online application for TAN can be made from the NSDL-TIN website.
Addresses of the TIN FC are available at www.incometaxindia.gov.in or https://www.tin-nsdl.com.
Can an online application be made for allotment of TAN?
TAN is allotted by the Income Tax Department on the basis of the application submitted to TIN Facilitation Centres (TIN-FC) managed by NSDL. NSDL will intimate the TAN which will be required to be mentioned in all future correspondence relating to TDS/TCS.
Can an application for TAN be made on a plain paper?
Yes. The application can be made online through https://www.tin-nsdl.com
Can form 49B be filled on a typewriter?
No. TAN Application can be made only on Form 49B. The application form can be downloaded from the website of the Income Tax Department (www.incometaxindia.gov.in) or NSDL ( https://www.tin-nsdl.com ) or obtained from any other source. The application is also available at TIN Facilitation Centres.
What are the documents that need to accompany the TAN application?
Yes. But typing should be in capital letters with good impression.
What if incomplete form 49B is submitted?
No documents are required to be accompanied with Form 49B i.e. the application for allotment of TAN. However, where the application is being made online, the acknowledgment which is generated after online filling up the form will be required to be forwarded to NSDL. Detailed guidelines for the submission of application are available at https://www.tin-nsdl.com
What is the fee for filing application for TAN?
The TIN Facilitation Centre will assist the applicant to correctly fill up Form 49B but incomplete or deficient application will not be accepted.
How will the new TAN be intimated to the deductor?
Currently the fee for filing the TAN application is Rs.55/- + service tax as applicable (the application fees may change from time to time).
How can a deductor know his TAN if he has an old TAN, or if he has earlier applied for TAN but hasn't got TAN?
NSDL will ensure intimation of new TAN at the address indicated in the Form 49B
After making the application for allotment of TAN in Form 49B, how to know the status of the application?
TIN Facilitation Centres will help the deductors in ascertaining their correct TAN from the database. TAN can also be verified from the information on the website of Income Tax Department at www.incometaxindia.gov.in. Using the "Know Your TAN" facility at www.incometaxindia.gov.in or https://incometaxindiaefiling.gov.in the deductor can know his TAN.
Is it necessary to apply for different TAN if a deductor has to deduct tax from different types of payments like salary, interest, dividend, commission, etc.?
The status of TAN application can he checked by using the "Track your PAN/TAN Application Status" from www.incometaxindia.gov.in or https://www.tin-nsdl.com.
Is a separate TAN required to be obtained for the purpose of tax collection at source?
No. TAN once allotted can be used for all type of deductions. It can also be used in case tax is being collected at source.
Should Government deductors apply for TAN?
In case of multiple DDOs, should all of them apply for TAN?
In case a TAN has already been allotted for the purpose of tax deduction at source (TDS), then no separate application needs to be made for obtaining separate TAN for the purpose of tax collection at source (TCS). The same number can be quoted in all returns, challans and certificates for TCS. However, if no TAN has been allotted, a duly filled in Form 49B, along with the application fees is to be submitted at any TIN-FC.
Can branches of companies/banks have separate TANs?
Yes. In such a case, the name of the Division, name and location of branch or the designation of the person responsible for deducting/collecting tax, whichever is applicable, should be clearly given in the application for allotment of TAN.
Can an e-TDS return be filed without TAN or in case TAN has not been alloted?
Yes. In such a case, the name and location of branch or the designation of the person responsible for deducting/collecting tax, whichever is applicable, should be clearly given in the application for allotment of TAN
What is duplicate TAN?
Quoting of TAN is mandatory in TDS and TCS returns, whether filed in paper or electronic format. The returns, whether in paper or electronic format, will not be received in case TAN is not quoted.
In case duplicate TAN has been allotted, which TAN should be used?
Duplicate TAN is a TAN which has been inadvertently obtained by a same person who is responsible for deducting/collecting tax and who already has a TAN allotted to him earlier. In other words, more than one TAN issued to a person is called duplicate TAN. It is illegal to possess or use more than one TAN. Different branches/divisions of an entity may, however, have separate TAN.
What do we have to do if we have been allotted a duplicate TAN by oversight?
In case duplicate TAN(s) have been allotted to a person, then the TAN which has been used regularly should be used. The other TAN(s) should be surrendered for cancellation by using "Form for Changes or Correction in TAN" which can be downloaded from the website of NSDL (https://www.tin-nsdl.com).
Can we quote Permanent Account Number (PAN) in place of TAN?
In case duplicate TAN has been allotted, an application should be made for cancellation of the TAN which has not been used. Application for cancellation of TAN is to be made in the "Form for Changes or Correction in TAN" which can be downloaded from the website of NSDL (https://www.tin-nsdl.com) or obtained from any other source. The application is also available at TIN Facilitation Centres.
How can any change in address or details on the basis of which TAN was allotted be rectified?
No. PAN should never be quoted in the field where TAN is required to be quoted. The purposes for which PAN and TAN are allotted are different. TAN is a unique identification number which is allotted to persons who are required to deduct tax at source or collect tax at source.
PAN is a unique identification number issued to keep a linking of the transactions carried by a person like payment of tax, TDS/TCS credit, return of income, return of wealth, correspondence with the Income Tax Department or correspondence by the Income Tax Department, investments made by a person, loan taken by a person, etc.
If there is any change in the data provided in the application for allotment of TIN (i.e. data provide at the time of allotment of TAN), then such change is to be communicated to the Income Tax Department by intimating the change in , the "Form for Change or Correction in TAN data". Duly filed form should be submitted to the TIN Facilitation Centres or an online application can be made at https://www.tin-nsdl.com