TDS assessees must quote correct PAN or pay more tax

Tax assessees may have to shell out higher tax at 20 percent on their non-salary income in case they do not quote their correct Permanent Account Number(PAN).

"The deductee (person from whose income tax is deducted), shall mandatorily furnish his PAN to the deductor failing which the deductor shall deduct tax at source (TDS) at higher rates," says the Finance Bill for 2009-10.

The proposal will apply for incomes, other than salary, like interest, rent, royalty etc.

Non-residents would also come under its ambit.

The government proposes to make amendments in the Income tax Act to charge those not quoting PAN at a higher tax rate from 1^st April next year.

The bill says the deductor will deduct tax above the rates than prevailing rates or 20 percent, whichever is higher, in case the TDS assessee does not furnish his PAN.

Tax consultant Deloitte Haskins & Sells partner Neeru Ahuja said in most cases, 20 percent is higher than the prevailing tax rate of TDS. As such, the tax liability may increase to 20 percent, if PAN is not quoted correctly.

She said earlier companies were running after vendors to quote correct PAN, but now vendors will have the onus to take the PAN and quote it correctly.

In fact, people who have interest income or other income which is not taxable should also fill a form (15 G) and senior citizens (above 65 years of age) or pensioners (form 15H) and quote their PAN in the form, if they do not want to be taxed.

The tax department has its own logic making the PAN numbers mandatory.

"In a number of cases, the non-quoting of PANs by deductees is creating problems in the processing of returns of income and in granting credit for tax deducted at source, leading to delays in issue of refunds," government said.

All existing assesses or taxpayers or persons who are required to furnish a return

of income, even on behalf of others, should have a PAN.

Also, anyone who intends to enter into financial transactions should have a PAN. Over 75 lakh PANs are issued every year.