Get ready to cough up higher tax upfront from the next fiscal in case you do not quote the Permanent Account Number (PAN) in transactions subject to tax deduction at source.
Tax at the higher prescribed rate or 20% will be deducted on all transactions liable to TDS where the PAN of the deductee is not available, the finance ministry said in a statement on Wednesday.
The provision will have major implications for small contractors, small businesses, professionals and investors who earn interest from fixed deposits. The rate of TDS in these cases ranges from 1% to 10%.
The new provision related to tax deduction at source (TDS) under the Income Tax Act 1961 will become applicable with effect from April 1, 2010, it said.
All assesses will have to quote their PAN in their 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, the statement said. The law will also apply to all non-residents in respect of payments or remittances liable to TDS.
All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by March 31, 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date, the Ministry said.
Assesses who do not have PAN will also not get certificate from assessing officer about lower or no tax liability, the statement said.