Whether provision for deducting Tax at source @ 20% is also applicable in case of employee where he has not obtained PAN, please clarify.....
11 Replies
Mahendra Pandil
(Student Final CA)
(93 Points)
Replied 21 December 2011
THE EMPLOYEE IS MADE COMPULSION TO OBTAIN PAN NO. IF HE IS CROSSING BASIC EXEMPTION LIMIT,
SO THERE IS NO QUESTION FOR 20% TDS FOR EMPLOYEES.
Deepak Gupta
(CA Student)
(15922 Points)
Replied 22 December 2011
| Originally posted by : Suraj Prasad Shaw | ||
 |
Whether provision for deducting Tax at source @ 20% is also applicable in case of employee where he has not obtained PAN, please clarify..... |
 |
Finance Act (No. 2) 2009, w.e.f. 01/04/2010 has inserted sec. 206AA in the Income-tax Act which makes furnishing of PAN by the employee compulsory in case of payments liable to TDS. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor shall make TDS at a higher of the following rates
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.
.
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.
CIRCULAR NO. 05/2011, dated 16.08.2011
@*CS Siddharth Bumb. *
(B.Com, CA Final, CS )
(5270 Points)
Replied 22 December 2011
IF PAN IS NOT THERE THEN HOW WILL YOU DEDUCT TDS??/ IF THERE IS NO PAN TDS CANNOT BE DEDUCTED
Amol
(Assistant Manager - Taxation)
(21 Points)
Replied 22 December 2011
Even if the emplyee has not furnished PAN to the employer, it is a statutory obligation on the employer to deduct the tax if the salary income of employee is exceeding the BEL. In this case, in TDS return you cannot mention the PAN of the deductor and the employee shall not get the deduction linked to him in the absence of PAN.
CA Kiran Sutrave
(CA)
(428 Points)
Replied 22 December 2011
Yes if PAN is not provided by the employees then TDS is to be deducted @ 20.6% or if the employees fall in highest tax slab then @ 30.9%.
Circular No. 05/2011 dated August 16, 2011 is attached for your reference.
Attached File : 16139 891436 circular no 5 dated aug 16 2011.pdf downloaded: 318 times
CA PRAVEEN SINGH
(MANAGER ACCOUNTS)
(2277 Points)
Replied 22 December 2011
NOT CLEARLY MENTIONED ABT THIS IN ACT....
CMA. Subhash Kumar Jha
(General Manager - Finance)
(8396 Points)
Replied 22 December 2011
If PAN is not provided, TDS will be deducted at higher of the following :
1. 20 %
2. TDS as per Actual slab.
Bhanu Prakash Rao
(Think Beyond Stay Ahead...!)
(1064 Points)
Replied 22 December 2011
Agree with Deepak Gupta.....
C.A. Sandeep Wawhal
(CA, PGDFM, BCom)
(1831 Points)
Replied 22 December 2011
Finance Act (No. 2) 2009, w.e.f. 01/04/2010 has inserted sec. 206AA in the Income-tax Act which makes
furnishing of PAN by the employee compulsory in case of payments liable to TDS. If employee (deductee) fails to furnish his/her PAN to the deductor, the deductor shall make TDS at a higher of the following rates
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.
The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS
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