The Finance Bill, 2026 proposes a significant compliance relief for taxpayers by rationalising the requirement to obtain a Tax Deduction and Collection Account Number (TAN). Through Clause 75, section 397 of the Income-tax Act, 2025 is amended to expand the list of cases where TAN is not required, particularly benefitting resident individuals and Hindu Undivided Families (HUFs) involved in high-value but one-time transactions such as purchase of immovable property.
Existing Law: Mandatory TAN for Deductors
Under section 397(1)(a) of the Income-tax Act, 2025:
- Every person deducting or collecting tax at source is required to apply for and obtain a TAN
- Section 397(1)(c) already provides limited exemptions from this requirement in specified cases
However, the scope of exemption has been narrow, resulting in disproportionate compliance burden, especially where tax deduction is required only for a single or occasional transaction.
The Compliance Issue in Practice
A major practical difficulty arises in immovable property transactions:
- When a resident buyer purchases property from a resident seller, TAN is not required
- However, when the seller is a non-resident, the buyer must deduct tax under section 393(2)
- In such cases, even a resident individual or HUF buyer is currently required to obtain TAN, often for a one-time transaction
This creates unnecessary procedural burden, delays in transactions, and increased risk of technical defaults.
What Clause 75 Proposes
Clause 75 seeks to substitute clause (c) of section 397(1) to expand the list of persons not required to obtain TAN.
Revised Categories Exempt from TAN Requirement
Under the proposed amendment, section 397(1)(a) (TAN requirement) shall not apply to:
1. Certain Specified TDS Transactions
A person deducting tax under section 393(1) in respect of:
- Sl. No. 2(i): Insurance commission
- Sl. No. 3(i): Commission or brokerage
- Sl. No. 6(ii): Payments to contractors by individuals or HUFs
2. Virtual Digital Asset (VDA) Transactions
A person referred to in section 393(4) [Table Sl. No. 12.C(a)], deducting tax on “Transfer of virtual digital assets under section 393(1) [Table Sl. No. 8(vi)]”.
This avoids TAN compliance for persons involved in isolated crypto or digital asset transactions where TDS is required.
3. Key Relief: Property Purchase by Resident Individual or HUF
A resident individual or Hindu Undivided Family deducting tax on:
- Consideration for transfer of immovable property
- Under section 393(2)
This exemption applies irrespective of whether the seller is resident or non-resident, thereby removing the existing anomaly.
4. Any Other Person Notified by the Central Government
The amendment also empowers the Central Government to notify additional classes of persons who may be exempted from obtaining TAN, providing flexibility for future rationalisation.
Effective Date
- The amendment will take effect from 1 October 2026
- It will apply to transactions undertaken on or after this date
Implications of the Amendment
For Property Buyers
- No need to obtain TAN for one-time property purchases
- Faster execution of transactions
- Reduced procedural complexity, especially in cross-border property deals
For Individuals & HUFs
- Relief from disproportionate compliance for occasional TDS obligations
- Lower risk of defaults and penalties due to technical non-compliance
For the Tax Administration
- Reduced volume of low-utility TAN registrations
- Focus shifted to substantive tax compliance rather than procedural formality
Policy Intent Behind Clause 75
The amendment aligns with the Government’s broader objectives of:
- Ease of doing business
- Reducing compliance burden for small taxpayers
- De-cluttering the TDS framework
- Encouraging voluntary and accurate compliance
By recognising that not all deductors are regular or institutional players, the law moves towards a more proportionate compliance regime.
Conclusion
Clause 75 of the Finance Bill, 2026 introduces a long-overdue and practical reform by removing the requirement to obtain TAN in several common yet low-risk scenarios. The most impactful relief is for resident individuals and HUFs purchasing immovable property, particularly from non-resident sellers, where TAN compliance had become an avoidable hurdle.
Overall, the amendment strikes a balanced approach, simplifying procedures without compromising tax collection.
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