Direct Tax Laws & International Taxation · Deduction, Collection and Recovery of Tax

TAN Application and Compliance Procedures (CA Final Direct Tax)

Updated 5 October 2026 · Fact-checked

TAN is the tax deduction and collection account number every deductor or collector must obtain, applying under rule 216 of the Income-tax Rules, 2026. To solve questions, check who must hold TAN, quote it on challans, returns and certificates, then apply the deposit, return and certificate due dates and the consequences of delay.

Understand TAN Application and Compliance Procedures

Tax deducted or collected at source is the government's money held by the deductor for a short time. To track it, the department needs to link each deposit to the right deductor. That link is the Tax deduction and collection account number (TAN), a 10-character alphanumeric number.

A person who is required to deduct tax at source or collect tax at source must apply for TAN. The application is made under rule 216 of the Income-tax Rules, 2026, in the prescribed form, to the agency authorised by the department. Once allotted, the number must be quoted on every document in the TDS/TCS chain. This is separate from PAN, which identifies the person whose income is taxed. TAN identifies the person who deducts or collects.

The compliance cycle has four parts. First, deduct or collect at the correct rate. Second, deposit the tax within the time allowed, quoting TAN on the challan. Third, file a periodic TDS/TCS statement (return), normally quarterly, quoting TAN. Fourth, issue a certificate to the deductee so they can claim credit for the tax.

In the exam, this topic is mostly about procedure and dates. You are given a deductor, a payment date and a filing date, and you must find the due date, the delay and the consequence. Quote the TAN rule, state the due date, then compute the interest or late fee.

The timelines below follow the pattern ICAI teaches. Check the exact form numbers and any change for tax year 2026-27 in your study material for the 2025 Act and 2026 Rules.

Key rules to remember

Who must obtain TAN: Every person required to deduct tax or collect tax at source must apply for and obtain TAN (rule 216); Apply in the prescribed form. For certain specified payments, such as purchase of immovable property, the deductor quotes PAN instead of TAN. Confirm the list in your material.
Where TAN must be quoted: TAN on: challans, TDS/TCS statements, TDS/TCS certificates and other prescribed documents; Failure to apply for TAN or to quote it attracts a penalty. Confirm the amount in your material.
Due date for depositing tax (non-government deductor): General rule: 7th of the next month; for tax deducted in March, 30 April. Exception: for specified payments, within 30 days from the end of the month of deduction; The exception covers TDS on purchase of immovable property, rent paid by specified individuals and HUFs, and similar specified payments listed in your material. For these, the deductor deposits using a challan-cum-statement and files no quarterly statement. Government offices that deposit through book entry follow a different timeline.
Due dates of quarterly TDS statements: Apr-Jun: 31 July | Jul-Sep: 31 October | Oct-Dec: 31 January | Jan-Mar: 31 May; A separate statement is filed for each type, such as salary and non-salary payments. These dates do not apply to the specified payments that use a challan-cum-statement.
TDS certificate for salary: Issue by 15 June after the end of the tax year; Issued by the employer to each employee.
TDS certificate for non-salary payments: Issue within 15 days from the due date of the quarterly statement; Example: for the Jul-Sep quarter, the statement is due 31 October, so the certificate is due 15 November.
Interest for late deduction or deposit: Interest = tax amount × rate per month × months (part of a month counts as a full month); Late deduction: 1% per month, running from the date the tax was deductible to the date it was actually deducted. Late deposit: 1.5% per month, running from the date of deduction to the date of deposit. Confirm the 2025 Act wording in your material.
Late fee for delayed statement: ₹200 per day of delay, capped at the tax amount in that statement; Count days from the day after the due date to the day of filing. The fee must be paid before the statement is filed. This follows the pattern taught from the earlier law; confirm the provision and rate under the 2025 Act in your material.

How to solve TAN Application and Compliance Procedures questions

Use this order for any question on TAN, deposit, returns or certificates.

1Identify the person: is the deductor or collector required to hold TAN? If TAN is missing, say they must apply under rule 216 and quote it from then on.
2Check whether this is a case where PAN is quoted in place of TAN, such as a specified payment by an individual or on property purchase.
3Note the date of deduction and the month it falls in. This fixes the deposit due date: 7th of next month, or 30 April for March. If the payment is a specified one (immovable property, rent by specified individuals or HUFs and similar), the due date is 30 days from the end of the month of deduction, by challan-cum-statement, with no quarterly statement.
4If tax was deducted late, compute interest at 1% per month from the date it was deductible to the date it was deducted. If deducted tax was deposited late, compute interest at 1.5% per month from the date of deduction to the date of deposit. Count part of a month as a full month.
5Identify the quarter and the statement due date. If filed late, compute the late fee at ₹200 per day, capped at the tax in the statement, and note that it is paid before filing.
6Fix the certificate due date: 15 June for salary, or 15 days from the statement due date for non-salary.
7State the conclusion in provision-facts-conclusion form, and mention penalty or default consequences if TAN was not quoted.

Quickest way: Date-line method

When to use it: Use for any case with dates and a request to compute interest, fee or due dates.

Draw a timeline with four points: deduction date, deposit due date, statement due date, certificate due date.
Mark the actual dates against each point and circle each delay.
For each delay, tag it: interest (deposit), late fee (statement), or both. Count months for interest and days for fee.
Compute and cap the late fee against the tax in the statement.
Write each line as due date, actual date, result.

Common mistakes in TAN Application and Compliance Procedures

Confusing TAN with PAN or saying the deductor quotes PAN on the challan for all payments.
Both are 10-character numbers and both appear in TDS forms.
Fix: PAN identifies the deductee. TAN identifies the deductor or collector. PAN is quoted by the deductor only for specific payments where the rule excuses TAN.
Using 7th of next month for tax deducted in March.
Students memorise the standard rule and forget the year-end exception.
Fix: For March deductions, the deposit date is 30 April. Always check the month of deduction first.
Applying the 7th-of-next-month rule and the quarterly statement to every TDS deposit.
The general rule is memorised and the specified payments are treated like ordinary deductions.
Fix: For TDS on immovable property, rent by specified individuals or HUFs and similar specified payments, the deposit is due within 30 days from the end of the month of deduction. It is made by challan-cum-statement and no quarterly statement is filed. Check the payment type first.
Counting interest in days instead of months.
Late fee is per day, so students use days everywhere.
Fix: Interest is per month or part of a month. Late fee is per day. Keep the two units separate.
Mixing up the interest periods for late deduction and late deposit.
Both are called interest for TDS default, and the rates (1% and 1.5%) are memorised without their periods.
Fix: Late deduction: 1% per month from the date the tax was deductible to the date it was deducted. Late deposit: 1.5% per month from the date of deduction to the date of deposit. Confirm against your material.
Applying the late fee without the cap, or forgetting to pay it before filing the statement.
The ₹200 per day figure is memorised alone.
Fix: The fee cannot exceed the tax deductible or collectible in that statement. Compare your answer to the tax amount. State that the fee is paid before the statement is filed, and confirm the provision under the 2025 Act in your material.
Giving the wrong certificate due date, such as using 15 June for non-salary certificates.
Salary and non-salary certificates are learned together.
Fix: Salary certificate: 15 June after the tax year. Non-salary: 15 days after the statement due date for that quarter.

Worked examples

Example 1

Case: Sundar Traders (partnership firm) deducted TDS of ₹40,000 on 10 June 2026 from a contractor payment. It deposited the tax on 20 August 2026. The firm had no TAN until July 2026. Compute the interest on late deposit and state the TAN position.

Show the solution

TAN position: the firm was required to deduct tax, so it should have applied for TAN under rule 216 before deducting, and quoted it on the challan. It had no TAN until July 2026, so it defaulted. Failure to apply for TAN attracts a penalty (amount as per your material). This penalty is a separate consequence and is not part of the interest.
Due date for deposit: tax deducted in June is due by 7 July 2026.
Actual deposit is 20 August 2026, so it is late.
Tax was deducted on the date it was deductible, so there is no late deduction and no 1% interest. Only the 1.5% late-deposit interest applies.
Interest period: from deduction date (10 June) to deposit date (20 August). 10 June to 9 July = month 1. 10 July to 9 August = month 2. 10 August to 20 August = part of a month, counted as month 3. Total = 3 months.
Interest = ₹40,000 × 1.5% × 3 = ₹1,800.
The accrued interest of ₹1,800 must be paid before the TDS statement is filed.

Answer: Interest on late deposit is ₹1,800 (3 months at 1.5% per month), and it must be paid before the TDS statement is filed. Separately, the firm should have obtained TAN before deducting tax, so it is exposed to the penalty for failing to apply for TAN (amount per your material). It must quote TAN on the challan and the statement.

Example 2

Case: Bhavna Ltd. made non-salary payments of ₹1,50,000 in the Jul-Sep 2026 quarter. The TDS rate on these payments is given as 10%, so it deducted TDS of ₹15,000. It filed the quarterly statement on 20 November 2026. Find the due date of the statement, the late fee, and the due date of the TDS certificates.

Show the solution

Due date: the statement for the Jul-Sep quarter is due 31 October 2026.
Delay: filed 20 November 2026. Days from 1 November to 20 November inclusive = 20 days.
Late fee = ₹200 × 20 = ₹4,000.
Cap check: the cap compares the fee with the TDS in the statement, which is ₹15,000 (not the ₹1,50,000 payment). ₹4,000 is below ₹15,000, so the cap does not apply.
Certificate due date: 15 days from the statement due date of 31 October 2026 is 15 November 2026.

Answer: The statement was due on 31 October 2026. The late fee is ₹4,000, to be paid before the statement is filed. The certificates were due by 15 November 2026; whether they were late depends on the date they were issued, which the case does not give.

Exam tips

Write TAN rule 216 in the first line of any theory answer on allotment, then add the quoting requirement.
In date-based cases, show the due date, actual date, and delay. Examiners give marks for each step even if the final figure is off.
Keep a clear note of the 7th, 30 April, 31 July, 31 October, 31 January, 31 May and 15 June dates. These are the most tested.
Do not cite section numbers from the 1961 Act. Use the 2025 Act terms, such as tax year, and cite rule 216 for TAN.
For case-scenario MCQs, first check whether the question gives a salary or non-salary payment before choosing the certificate date.

Practice questions from Deduction, Collection and Recovery of Tax

TAN Application and Compliance Procedures: frequently asked questions

Who needs to apply for TAN under rule 216?

Any person who is required to deduct tax at source or collect tax at source must apply for TAN. This includes companies, firms and other deductors. In some specified payments, the deductor may quote PAN instead.

Is TAN the same as PAN?

No. PAN identifies the taxpayer whose income is taxed. TAN identifies the person who deducts or collects the tax. TAN is quoted on challans, TDS/TCS statements and certificates.

What are the due dates for TDS returns?

For non-government deductors the quarterly statements are due on 31 July, 31 October, 31 January and 31 May for the four quarters of the tax year. Check your study material for any change for tax year 2026-27.

What happens if the TDS statement is filed late?

A late fee of ₹200 per day applies as taught, capped at the tax amount in the statement, and it must be paid before the statement is filed. A penalty can also apply in specified cases. Confirm the fee provision under the 2025 Act in your material, then compute the fee and check the cap.