Cess on tds rate u/s 206aa
This query is : Resolved
01 March 2016
Hello everyone.. One of my client is required to deduct tax on foreign remittance. but the receiver party don't have pan hence payer is deducting tax @ 20% as per 206AA. Please advice me whether cess @ 3 % on above 20% is applicable or not as the payment is made outside of India. please answer...
02 March 2016
no single reply...on this query
19 July 2024
Under Section 206AA of the Income Tax Act, if a person receiving income does not provide their Permanent Account Number (PAN) to the deductor (payer), then the deductor is required to deduct tax at a higher of the following rates:
1. The rate specified in the relevant provision of the Income Tax Act.
2. The rate or rates in force.
3. At the rate of 20%.
In your case, since the recipient does not have a PAN, the tax deduction rate under Section 206AA would be 20%. This rate includes the applicable cess, which is 3% of the tax amount.
To clarify:
- The rate of 20% includes the basic tax plus cess. Therefore, when tax is deducted at 20% under Section 206AA, it already accounts for the cess.
- There is no additional cess of 3% applicable on top of the 20% deduction rate. The 20% rate itself includes the cess component.
Hence, in your scenario where tax is deducted at 20% under Section 206AA, there is no further cess applicable on the deducted amount. The 20% deduction rate comprehensively covers both the basic tax and the cess.
1. The rate specified in the relevant provision of the Income Tax Act.
2. The rate or rates in force.
3. At the rate of 20%.
In your case, since the recipient does not have a PAN, the tax deduction rate under Section 206AA would be 20%. This rate includes the applicable cess, which is 3% of the tax amount.
To clarify:
- The rate of 20% includes the basic tax plus cess. Therefore, when tax is deducted at 20% under Section 206AA, it already accounts for the cess.
- There is no additional cess of 3% applicable on top of the 20% deduction rate. The 20% rate itself includes the cess component.
Hence, in your scenario where tax is deducted at 20% under Section 206AA, there is no further cess applicable on the deducted amount. The 20% deduction rate comprehensively covers both the basic tax and the cess.
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