TaxTMI 
TaxTMI 
Evolution of Tax Deduction and Collection Account Number : Clause 397(1) of the Income Tax Bill, 2025 Vs. Section 206CA of the Income-tax Act, 1961
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....in exceptions and prescribes the manner and context in which the TDCAN must be used. This clause must be analyzed in light of the historical and legal context of tax compliance mechanisms in India, particularly in comparison to the now-inoperative Section 206CA of the Income-tax Act, 1961, which previously governed the allotment and use of the Tax Collection Account Number (TCAN) for TCS transactions. Section 206CA, introduced in 2002 and rendered inapplicable post-October 1, 2004, was a specialized provision focusing on TCS compliance, specifically mandating the application for and quoting of the TCAN by persons collecting tax u/s 206C. The evolution from Section 206CA to Clause 397(1) reflects the legislative intent to streamline, unify,....
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....persons deducting or collecting tax, ensuring that every transaction involving TDS or TCS is linked to a unique identifier. * Prescribed Timeline: The provision contemplates a regulatory framework to prescribe the time within which the application must be made, allowing for administrative flexibility. * Non-duplication: If a TDCAN has already been allotted, the obligation does not arise again, preventing redundancy. Legal Significance: This requirement is foundational for the digitalization and centralization of tax compliance, facilitating automated reconciliation of tax credits, and minimizing errors or fraudulent claims. Clause 397(1)(b): Quoting of TDCAN in Documents This clause mandates that once a TDCAN has been allotted, the p....
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....d does not stifle routine or minor transactions, or those involving government or notified entities. Comparative Analysis with Section 206CA of the Income-tax Act, 1961 1. Scope and Applicability Section 206CA was introduced in 2002 to mandate the application for and quoting of a Tax Collection Account Number (TCAN) by persons collecting tax u/s 206C. Its scope was limited exclusively to TCS transactions. * Clause 397(1): Applies to all persons deducting or collecting tax-thus covering both TDS and TCS. The provision is broader in scope and unifies the compliance requirement for both types of transactions. * Section 206CA: Applied only to persons collecting tax u/s 206C (TCS). No requirement for deductors (TDS) was contemplated. 2. ....
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...., is designed for a digital, integrated tax administration system. It contemplates electronic filing, digital verification, and correction statements. Section 206CA, drafted in an earlier technological era, was limited to physical or basic electronic compliance and did not anticipate the current level of digital integration. 6. Inapplicability of Section 206CA Section 206CA was rendered inapplicable from October 1, 2004, likely due to the integration of TCS compliance with the broader TDS/TCS reporting framework and the adoption of the Tax Deduction and Collection Account Number (TAN) system u/s 203A. Clause 397(1) thus represents the next evolutionary step, building on the lessons learned from the operation and eventual obsolescence of....