19 December 2011
CIRCULAR NO. 05/2011 dated 16.08.2011
In case employee fails to furnish PAN to the Employer:
The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS . This section applies to any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVII-B of Income Tax Act. As chapter XVII-B covers all Payments including Salaries, Salaries are also covered by Section 206AA. In case of salaries there can be following situations.
a) Where the income of the employee computed for TDS u/s 192 is below taxable limit. b) Where the income of the employee computed for TDS u/s 192 is above taxable limit. In first situation, as the tax is not liable to be deducted no tax will be deducted. In the second case, if PAN is not furnished by the employee, the deductor will calculate the average rate of income-tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to deducted at the average rate. Education cess@ 2% and Secondary and Higher Education Cess@ 1% is not to be deducted, in case the TDS is deducted at 20% u/s 206AA of the Income-tax Act.
By mistake i wrongly stated directly average rate.
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