defaulting on deducting tax at source. The department is planning to allot Tax Deduction Account Number (TAN) to all drawing and disbursing officers of all states and central ministries.
TAN is a unique identification number, which is allotted to people who are deducting or collecting tax at source on behalf of the income tax department. It has to be quoted in all TDS/ TCS returns. As in the case of permanent account numbers (PAN) that helps to keep track of all assessees and their returns, TAN is used to keep a tab on all tax dedicators and deductions. If all
these officers have a TAN, It would be easier to track collections by state governments through TDS.
Tax officials point out that a large number of states have deducted the tax but have not remitted it to the Centre for the past two to three years. Some others meanwhile have not deducted the tax at all from the salaries and pensions of their employees.
The issue was also taken up at the recent income tax chief commissioner’s conference as a part to strengthen the TDS mechanism. While the exact quantum of such defaults by states is difficult to assess, tax officials say it is a recurring problem and needs to be addressed in order to increase collections through TDS.
The income tax department is also mulling several other measures to strengthen the TDS mechanism in states and increase collections. It is planning to appoint more officers in its Commissionerate to supervise deductions and collections under the system. The department may also start training programmes to sensitise the authorized dedicators in the states to comply with law and improve the TDS collections.
Increasing collections from TDS is a key focus area of the department, especially as it has been relying more on voluntary compliance. As a result of the various steps that have been undertaken, TDS collections increased by 51% in 2007-08 to Rs 1,06,700 crore from a mere 2.36% in 2004-05. The total tax collection in the fiscal stood at Rs 3, 14,486 crore. Similarly, till June this year, tax deducted and collected at source has risen at a rate of 50%.