192 (1) Any person responsible for paying any income chargeable under the head "Salaries" shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year.
Incase Employee having salaries below 250,000 Limit, rate is NIL as per the Finance Act, wich can be interpreted as either Nothing or Zero. (Webster defines NIL as Nothing, Zero) Its difficult to interpret the act on this - that is whether the rate should be nothing or Zero.
206AA. (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.
Now the comparison should be between higher of Zero or 20% or Nothing and 20%. Personally, I feel that it should be deducted at the rate of 20% since you can never trust the IT Department on this. They will wake up one fine day and interpret it in this manner. It's harsh for the employees though since a lot of them IT/BPO sector do not have even adequate documents for getting PAN Card..