Will skipping PAN attract higher tax?
All financial
transactions without a permanent account number (PAN) will attract tax from
April 1.
The government today said tax at higher of the
prescribed rate or 20 per cent will be deducted on all transactions liable to
tax deducted at source (TDS), where PAN of the taxpayer is not available.
"A new provision relating to TDS under
the Income Tax Act of 1961 will become applicable with effect from April 1. The
law will also apply to all non-residents in respect of payments or remittances
liable to TDS," the Central Board of Direct Taxes (CBDT) said in a
statement.
The Income Tax Department has already made it
mandatory for employers to quote PAN of their employees and parties from whom
tax is deducted while filing TDS returns.
The move of imposing penalty for not quoting
PAN, announced in the 2009-10 Budget, is aimed at strengthening the database of
the revenue department and increasing tax compliance.
"There is a widespread move to make PAN
ubiquitous for all financial transactions. It is basically to build up a tax
database and a tax information network. The higher tax is a kind of penalty to
bring more people within the ambit of tax information," said Amitabh
Singh, partner, Ernst & Young.
According to the new provisions, declaration
by the taxpayer under section 197A for non-deduction of TDS on payments will
not be valid if it is given without quoting PAN. The certificate for deduction
at lower rate or no deduction will not be given by the assessing officer under
section 197 in the absence of PAN.
To avoid disputes regarding quoting,
non-quoting of PAN or accuracy, all deductees and deductors will be required to
quote PAN of deductees in all correspondences, bills, vouchers and other
documents sent to each other. If a deductee fails to do so, he will have to pay
20 per cent TDS instead of 2 per cent on rental payments for plant and
machinery and 10 per cent on land and building.
"All deductors are 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 March 31 and communicate the same
to their deductors before tax is actually deducted on transactions after that
date," the CBDT said.
|