The Full form of TAN is Tax Deduction and Collection Account Number. Under the Income Tax Act, 1961, TAN is issued by Income Tax Department of India to those individuals and firms who are required to deduct or pay tax on payments made by them. Under Section 203A of the Income Tax Department, it is mandatory to provide the TAN in all TDS returns and Challans while paying tax.
Without having a TAN, a taxpayer can’t pay the tax. On receiving the tax amount the IT department verifies the amount and by mistake, if the taxpayer has deposited an extra tax then the extra tax will be credited back into his account. TAN is a 10-digit alphanumeric number. The first 3 letters of TAN represents a city, the 4th letter is the initials of the taxpayer and the next 5 numbers and the last letter make the TAN unique.
To apply for TAN, the taxpayer needs to fill the form no. 49B. Then he needs to attach all the required documents such as identity proof and address proof and submit it at the website of NSDL or Tax information network facilitation centre. The NSDL department, on receiving the TAN application form, verifies the details and sends the application form to the IT (Income Tax) department.