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TDS at a higher rate on all transactions not having PAN -PRO

Deepak (Sr. Manager Finance) (25 Points)

29 January 2010

As per new provision if we are making any payment to non resident and if they do not have the PAN then we have to deduct TDS @ 20%. Normally Nonresinded not have the PAN and they also not willing to have the same. Please share your view on this topic

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5 Replies

Amir (Learner) (4016 Points)
Replied 29 January 2010

Dear Deepak,

As per new amendment TDS in case Payee has not furnished PAN is to be deducted at

higher of following-

1) @ 20%

2) @ Rate prescribed

The above rule is applicable for Non Residents as well

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shailendra (C.A. FINAL) (189 Points)
Replied 29 January 2010

Dear Sir,

You are correct that NR's are not willing to take PAN. Thatswhy this power has been given to CIT under income tax act that you can get refund by applying to CIT if income is not taxable in india. For this purpose what companies do is:-

Say, you have to pay Rs. 50 to the NR

Now gross up the amount of Rs. 50 with the rate of TDS

50 / 100-TDS Rate i.e. 50/0.80 i.e Rs. 62.5

Now Deduct TDS on this amount 62.5*0.2 i.e. Rs. 12.5

Now pay Rs. 50 to NR and 12.5 as TDS. Now you can apply to the commissioner for the refund of TDS as the income was not taxable in india.

Deepak Goel (Partner) (54 Points)
Replied 29 January 2010

In my opinion, and as per the spirit of the circular, only those Non-residents whose income is liable to withholding Tax in India, should take PAN. NRs whose income is not subject to withholding tax should not be required to take PAN. Regards Deepak Goel

Dinesh (Student) (201 Points)
Replied 29 January 2010

Hi Friends, Is there any circular/ notification issued in this regard?

I think it is only an announcement by the Finance Ministry.

So is it enforceable in view of the law?

C.A Alok Mukherjee (service) (462 Points)
Replied 30 March 2010

Hi Amir,

I have a question,

Our company is having an employees' co-operative society the objective of which is to provide loan to employees and collect interest and also to disburse the interest to the members i.e the employees who have deposits. Beside they pay interest to company also for the fund provided by the company as loan. They did not applied for a PAN or filed IT return before.

Now with the changed senario especially on PAN and more stringent provision as introduced for tds, the company also feel they should apply for PAN deduct tds according to rule. Whether their income will be deductible in section 80P? Whether their activity will be covered for IT perview ? Can anybody please help me out?

regards,