TDS

This query is : Resolved

M H Laskar (Querist)
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29 September 2009 Dear Sir,
I have deducted tax at source (Contractor) from Bill who has not provided PAN & so I have not yet issued cheque for payment. I informed him to provide the PAN, but he does not and angrily asks for his payment. Is this manadatory to take PAN if TDS made ? Is there any Govt. Circular in this regards ?
Kindly help & suggest.

Thank you.

CA SANJAY MUKHERJEE

CA SANJAY MUKHERJEE (Expert)
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30 September 2009 Dear Mr. Laskar,

It will me mandatory w.e.f 01.04.2010 as per new section 206AA.

Effective from April 2010
Even though lot discussed, the new section will be applicable only for the payments made on or after April 01, 2010. Till then, normal rates / prescribed rates would be applicable even in case, PAN is not available / invalid.

The copy of new section 206AA is provided for reference.
Section 206AA.

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:â€”
at the rate specified in the relevant provision of this Act; or
at the rate or rates in force; or
at the rate of twenty per cent.
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.
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).
No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.
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.
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.

K V Subba Rao

K V Subba Rao (Expert)
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30 September 2009 Tax Deductors are required to file Quarterly Returns. These Returns are not accepted unless PAN data of Deductees for a minimum number of 85 percent of all Deductees is furnished. (Source: Para 174 in Page A-324 of 32nd edition of Singhania's Ready Reckoner)

Regarding "angry mood" of Contractor, take it as "occupational hazard" of persons working in Accounts Dept.

Try to get out of the "problem" with the active co-operation of Officials at appropriate level having authority to award Contract. For this first you need to explain to Officials in your Company statutory obligation cast on your Company.

Such "occupational hazards" are faced by Accounts Section in several Companies and not unique or peculiar to you alone.

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