Income Tax - Higher TDS/TCS for Specific PAN's

Under the Income Tax Act, 1961, TDS/TCS applicable to a transaction is at a higher rate when the PAN is;

1. In-operative (Aadhaar not linked to PAN)

2. PAN is not compliant with sections 206AB & 206CCA

A. Higher TDS Rates

I. In-operative PAN (Aadhaar not linked to PAN)

TDS will be at the higher of the following;

a. Rate as per applicable section

b. Rate or rates in force

c. 20%

Exceptions

Higher rate will be capped at 5% for TDS under sections

1. 194-O – Payments made to e-commerce participants

2. 194Q – Purchase of goods

II. PAN is not compliant with section 206AB

TDS will be at the higher of the following;

a. Twice the rate as per applicable section

b. Twice the rate or rates in force

c. 5%

Exceptions

Higher rate will not be applicable to TDS under sections

1. 192 – Salary

2. 192A – Withdrawal from EPF

3. 194B – Winning from lotteries, crossword puzzles, gambling, betting, etc.

4. 194BA – Winning from online games

5. 194BB – Winning from horse race

6. 194-IA – Payment of consideration to buy an Immovable Property other than rural agricultural land

7. 194-IB – Payment of rent by certain Individuals or HUF

8. 194LBC – Income in respect of investment in Securitization Trust

9. 194M – Payment to the contractor, commission agent, broker, or professional by certain Individuals or HUF

10. 194N – Cash withdrawal

11. 194S – Transfer of Virtual Digital Asset (if the payer is a specified person)

12. Non-residents not having permanent establishment in India

13. Residents not required to file ITR

B.    Higher TCS Rates

In-operative PAN (Aadhaar not linked to PAN) or PAN is not compliant with section 206CCA

TCS will be at the higher of the following;

a. Twice the rate as per applicable section

b. 5%

Failure to Comply will Result In

1. Paying the differential TDS/TCS out-of-pocket

2. Interest up to 1.5% p.m. for late payment of differential TDS/TCS

3. Penalty up to the amount of differential TDS/TCS

4. Imprisonment up to 7 years of Officers-in-Charge

It is very important for businesses to check the compliance of a PAN before deducting/collecting income tax on transactions with that PAN-holder.