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Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2015 When we are liable to apply for TAN for proprietary concern ??

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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25 February 2015 Proprietary concern means individual and in case of individual and HUF liability to deduct TDS arises only if accounts are audited u/s 44AB in the previous financial year. So if your accounts were audited in previous financial year and you make any payment which is liable for TDS then you are required to obtain TAN.

Querist : Anonymous

Querist : Anonymous (Querist)

03 March 2015 In Current FY , Clients turnover exceeds threshold limit for tax audit. That means tax audit need to done in next year for current financial year.

However applicability of TAN is arise on the basis of previous year applicability of tax audit.

As per you, TAN need to be obtained FY 2015-16 as tax audit applicable for fy 2014-15.

but client has incurred expenses which are liable for tds in current year i.e. FY 2014-15. Then how will report in tax audit ?????????????

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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26 July 2025 Great question! Here’s a clear explanation of TAN applicability and tax audit reporting for a proprietary concern:

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### TAN Applicability for Proprietary Concern

* **TAN (Tax Deduction and Collection Account Number)** is mandatory if you deduct TDS (Tax Deducted at Source).
* For **proprietorships (individuals)** and **HUFs**, TDS deduction liability arises **only if the accounts are required to be audited under section 44AB** in the **previous financial year**.
* This means if your client’s accounts **were audited for FY 2013-14**, then for FY 2014-15, TAN is applicable when you deduct TDS.
* If the audit was **not applicable for FY 2013-14**, then TAN is **not mandatory** for FY 2014-15 even if you deduct TDS in FY 2014-15.

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### Your Specific Scenario:

* Client’s turnover **exceeds tax audit limit in FY 2014-15**, so audit will be done **next year (FY 2015-16)**.
* But your client **incurred TDS-liable expenses in FY 2014-15**.

**Question:** How to report these TDS deductions in the audit for FY 2014-15 when TAN was not mandatory?

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### Explanation:

1. **TAN Applicability is based on the *previous* year’s audit requirement**, so for FY 2014-15, TAN is applicable only if audit was done for FY 2013-14.

2. If audit was **not applicable** for FY 2013-14:

* The client is **not legally required** to obtain TAN in FY 2014-15.
* However, if TDS is deducted without TAN, TDS return filing will be affected.
* Practically, TAN **should be applied immediately** once TDS deduction starts, even if audit is not yet applicable, to avoid penalty and filing issues.

3. **In the audit report for FY 2014-15 (done in FY 2015-16):**

* Auditor will note the TDS deductions made.
* Auditor may recommend regularization of TAN if TDS deducted without TAN.
* Penalties for late TAN application may be disclosed.

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### Summary & Best Practice:

* TAN is **mandatorily required only if accounts are audited in previous year**.
* But if TDS deduction occurs without TAN, it can create compliance issues.
* So **it’s advisable to apply for TAN as soon as TDS deduction starts** regardless of audit applicability.
* Auditor will check compliance during tax audit and report accordingly.

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If you want, I can also help draft the relevant notes for tax audit or prepare a checklist for TAN compliance. Would you like that?

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