TDS AT MAXIMUM RATE WITHOUT PAN -FILL PAN ON 15G/15H

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27186 Points)

23 March 2010  

A new provision relating to tax deduction at source (TDS) under the Income Tax Act 1961 will become applicable with effect from 1st April 2010. Tax at higher of the prescribed rate or 20% will be deducted on all transactions liable to TDS, where the Permanent Account Number (PAN) of the deductee is not available. The law will also apply to all non-residents in respect of payments / remittances liable to TDS. As per the new provisions, certificate for deduction at lower rate or no deduction shall not be given by the assessing officer under section 197, or declaration by deductee under section 197A for non-deduction of TDS on payments shall not be valid, unless the application bears PAN of the applicant / deductee. 

All deductors are liable to deduct tax at the higher rate in all transactions not having PAN of the deductees on or after 1st April 2010. In order that there is no dispute regarding quoting / non-quoting of PAN or accuracy thereof, the law requires all deductees and dedutors to quote PAN of deductees in all correspondences, bills, vouchers and other documents sent to each other. All deductors are, therefore, advised to intimate their deductees to obtain and furnish their PAN so as to avoid TDS at a higher rate. All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by 31st March 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date.

The procedure for obtaining PAN is simple, inexpensive and quick. Application for PAN can be filed in Form 49A to National Securities Depository Ltd. (NSDL) or Unit Trust of India Investor Services Ltd. (UTIISL) or their intermediaries. Non-residents can apply through the local embassy / consulate of India.

On the basis of New section 206AA ,it is now necessary for persons who are submitting Form 15H and 15G  and does not have a PAN ,they must have PAN and should mention the PAN on form 15H/15G.
So even you have income less than taxable income ,or in case of senior citizen tax is not payable on total income even then they have to apply for the pan .As the new clause is applicable from 01.04.2010 so such person should apply for new PAN before 01.04.2010 to avoid deduction of TDS and i.e also at Maximum rate of 20%..
Further it is clarified that Higher TDS doesn't means higher income tax .Means its a Just with holding of amount and even in these type of cases assessee can file his return and can claim refund from income tax department .But to claim the refund PAN is required ,so it is advisable to all my friend ,who may fall under this provisions to apply for pan and avoid TDS as you know that there may be some difficulties and problem to get refund from Income tax Department
.

New provision is given below

206AA. Requirement to furnish Permanent Account Number.—(1) 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:—
   (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.
(2) 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.
(3) 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).
(4) No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.
(5) 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.
(6) 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.”.