No PAN? Be prepared to pay 20% tax (TDS)

The tax deducted at source, or TDS, on payments could be as high as 20% for those not quoting PAN against the regular rate of 2%-10%. The Budget 2009-10 had made it mandatory for residents and non-residents to quote this number or face a higher rate of withholding tax. It comes into effect from Thursday, April 1.

Budget 2009 introduced a new provision (Section 206AA), effective April 1, 2010, which provides for deduction of tax at source at a higher rate where no PAN is provided to the payer. In such a scenario, taxes are required to be withheld at withholding tax rates provided under the Act; or rates provided under the tax treaty or schedules to tax laws; or 20%, whichever is higher.
The requirement of providing a PAN has been made applicable to payments to be made to all persons, i.e., residents as well as non-residents. The provision of PAN has also been made implicit where payments are allowed without tax withholding based on a self undertaking, and in cases where lower or nil tax withholding certificates are to be issued based on applications filed by receiver of income.




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