Indias chief taxman feels a significantly lower number of companies are paying taxes properly.

Its all in the TAN number, according to S S N Moorthy, chairman of the Central Board of Direct Taxes.

TAN is acronym for tax-deduction account number.

Companies or entities that deduct tax before making any payment need to compulsorily have TAN. Only then can they deduct tax at source.

I am not sure all entities liable to deduct tax have got a valid TAN, Moorthy said.

And here is the math: There are roughly 3.5 crore taxpayers in the country, but only 22 lakh TANs.

And we collect Rs 140,000 crore through tax deduction at source (TDS) annually from 22 lakh TANs, said Moorthy.

Tax officials say compared with the total number of tax payers, 22 lakh TANs is lower than what it should be. This has relevance, considering TDS forms only 37% of the total direct tax collection.
So how many entities do not have TAN and therefore do not show or deduct tax at source?

We have no idea as the numbers relating to private companies/entities are not known, Murthy admitted. The more the TAN, the more the deductions and more the collections.

We want to enlarge the TAN network. But we want to have a positive approach on this. We do not want any clashes between the Income Tax Department and companies or entities.

To persuade people to practise use of TAN, CBDT has started an awareness campaign starting with government departments and public sector companies across India.

Last year, we went on a statewide campaign to induce the TAN culture in states with government DBOs (officials incharge of collecting taxes) and PSUs, telling them that if they are deducting tax, they need to have a TAN, he said, while addressing a seminar on TDS organised by the Indian Merchants Chamber on Saturday.

The number of TANs need to rise for the department to be able to reach the tax collection numbers that are being set.

This year the department has a target of collecting Rs 430,000 crore through taxes.

This is after surrendering Rs 26,000 crore because of lower TDS rates. There has been moderation of tax rates so that there is more voluntary compliance, Moorthy said.

Meanwhile,Moorthy said direct tax collections will double once the Goods and Services Tax comes into effect.

All transactions will be transparent to us due to which direct tax collections will be higher, Moorthy said.