1. Core Rule (Strict Liability)
- No PAN = Higher TDS/TCS:
- TDS rate: 20%(instead of normal rate)
- TCS rate: Twice the normal rateor 5% (whichever is higher)
- Applies even if:
- Payment is below TDS threshold
- Recipient is eligible for lower/NIL deduction under DTAA
2. Applicability
- All Transactionsrequiring TDS/TCS under:
- Salaries (192)
- Interest (194A)
- Professional fees (194J)
- Rent (194I)
- E-commerce (194-O)
- Crypto (194S) etc.
Exceptions (PAN Not Mandatory)
| SCENARIO | PROOF REQUIRED |
| NRIs under DTAA | Tax Residency Certificate + Form 10F |
| Government entities | Official exemption order |
| Non-resident shipping companies | Declaration u/s 172(4) |
4. Compliance Requirements
- Deductor/Collector Must:
- Verify PAN(via NSDL/ITD portal)
- Report in TDS/TCS returns(Forms 24Q/26Q/27Q)
- Maintain recordsfor 8 years
- Penalties for Non-Compliance:
- ₹10,000 per default (Section 272B)
- Disallowance of expense (Section 40(a)(ia))
5. Judicial Precedents
- Fidelity Group (2019): DTAA benefits denied without PAN
- Wipro Ltd (2021): 20% TDS upheld even for exempt income
- Amazon Seller (2023): Marketplaces must enforce PAN for 194-O
6. Practical Scenarios
| CASE | NORMAL TDS | WITHOUT PAN |
| ₹50K FD interest | Nil (below threshold) | 20% (₹10K) |
| ₹1L professional fee | 10% (₹10K) | 20% (₹20K) |
| ₹5L property purchase | 1% (₹5K) | 20% (₹1L) |
7. Recent Updates (2024)
- Aadhaar-PAN Linking: Mandatory for TDS credit
- QR Code Verification: New tool for instant PAN checks
- Non-Individual PANs: Now required for HUF/trusts in 194N/194S
8. Proactive Measures
1. For Deductors:
- Implement PAN validationin payment systems
- Collect PAN during onboarding (vendors/employees)
2. For Payees:
- Update PAN across all income sources
- File Form 60only if PAN exempt
Key Takeaway: This provision makes PAN the non-negotiable anchor for all tax credits. A single missing PAN can trigger:
- Heavy withholding taxes
- Refund delays
- Compliance notices
