Tuesday, January 26, 2010

20% TDS w.e.f. 01.04.2010

No.402/92/2006-MC (04 of 2010)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi

dated 20th January 2010

A new provision relating to tax deduction at source (TDS) under the Income Tax Act1961 will become applicable with effect from 1st April 2010. Tax at higher of the prescribedrate or 20% will be deducted on all transactions liable to TDS, where the Permanent AccountNumber (PAN) of the deductee is not available. The law will also apply to all non-residentsin respect of payments / remittances liable to TDS. As per the new provisions, certificate fordeduction at lower rate or no deduction shall not be given by the assessing officer undersection 197, or declaration by deductee under section 197A for non-deduction of TDS onpayments shall not be valid, unless the application bears PAN of the applicant / deductee.

2. All deductors are liable to deduct tax at the higher rate in all transactions not havingPAN of the deductees on or after 1st April 2010. In order that there is no dispute regardingquoting / non-quoting of PAN or accuracy thereof, the law requires all deductees anddedutors to quote PAN of deductees in all correspondences, bills, vouchers and otherdocuments sent to each other. All deductors are, therefore, advised to intimate theirdeductees to obtain and furnish their PAN so as to avoid TDS at a higher rate. All deductees,including non-residents having transactions in India liable to TDS, are advised to obtain PANby 31st March 2010 and communicate the same to their deductors before tax is actuallydeducted on transactions after that date.

3. The procedure for obtaining PAN is simple, inexpensive and quick. Application forPAN can be filed in Form 49A to National Securities Depository Ltd. (NSDL) or Unit Trustof India Investor Services Ltd. (UTIISL) or their intermediaries. Non-residents can applythrough the local embassy / consulate of India. Applications can also be filed, paid for ortracked online through the Internet on the following web-sites:-
  • http://incometaxindia.gov.in/
  • https://incometaxindiaefiling.gov.in/portal/index.jsp
  • http://www.tin-nsdl.com/http://www.utitsl.co.in/

4. The Central Board of Direct Taxes (CBDT) has issued Notification No.94/2009relating to taxation of perquisites / profits in lieu of salary and Circular No.1/2010 for theguidance of tax dedutors for salaries. These documents are available on the department’s website at http://incometaxindia.gov.in/


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