20% TDS on furnishing Invalid/Not having PAN Number as a Deductee

Thursday, November 12, 2009 | comments

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To achieve transparency and increased computerisation, whereby the rate at which tax is to be deducted will be twenty per cent (20%) or the rate in force which is higher in case Permanent Account Number (PAN) is not furnished by the person whose tax is to be deducted at source. A difficult obligation is being put on the deductor to ensure that PAN furnished by the deductee is correct. If the same is invalid or does not belong to the deductee, the tax rate applicable shall be 20 per cent. In the absence of any mechanism available to be deductor to verify the correctness of the PAN furnished, it will be difficult for the dedcutor to ensure that the Pan furnished is the correct PAN of the deductee.


Regarding Requirement to furnish Permanent Account Number Act says as under :-

206AA. (1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at source in accordance with the provisions of sub-section (1).

(4) No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

(5) The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

(6) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of sub-section (1) shall apply accordingly.


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