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No PAN, High TDS

Jan 28, 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 the applicable rate or 20%, whichever is higher, will be deducted on all transactions liable to TDS, where the Permanent Account Number (PAN) of the deductee is not available.

Accordingly, if you are one of those who do not have a PAN yet, then you would be subjected to the higher rate of tax. An example to illustrate this is, suppose you earn a bank interest of Rs. 100,000, then though the applicable rate of TDS is 10% but you would be levied a rate of 20%. In this, you turn out to be poorer by Rs. 10,000 and the government richer unnecessarily.

In order to avoid any dispute regarding quoting / non-quoting of PAN or accuracy thereof, the law requires all deductees (i.e. you) and deductors (i.e. the bank in the above example) 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.

This change has been made applicable also to non-residents having transactions in India that are liable to TDS. Such non-residents 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. You can use the simple electronic platform for application of PAN by clicking on this link

-Team RwT

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