Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

[Section 206AA]- TDS on payments made to Resident and its Requirement to furnish PAN

[Section 206AA]- TDS on payments made to Resident and its Requirement to furnish PAN
[Section 206AA]- TDS on payments made to Resident and its Requirement to furnish PAN

(1) [Section 206AA(1)]- Consequences if PAN is not furnished to the deductor by the deductee:

Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i)         at the rate specified in the relevant provision of this Act; or

(ii)        at the rate or rates in force; or

(iii)       at the rate of 20%.

 (2) [Section 206AA(2)]- Form No. 15G and 15H valid only if PAN is quoted in the declaration:

No declaration under Form No. 15G or 15H shall be valid unless the person furnish his Permanent Account Number in such declaration.

(3) [Section 206AA(3)]- Consequences if PAN not quoted and declaration becomes invalid:

In case any declaration becomes invalid under section 206AA(2), the deductor shall deduct the tax at source in accordance with the provisions of section 206AA(1).

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(4) [Section 206AA(4)]- Application made under section 197 should contain PAN:

No certificate under section 197 (relating to lower or nil rate of tax) shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

(5) [Section 206AA (5)]- PAN to be quoted in all correspondence, Acts, etc.:

The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

(6) [Section 206AA (6)]- Provisions of section 206AA (1) shall apply if PAN is invalid:

Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee. it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the tax shall have to be deducted at higher of the above three rates

(7) [Section 206AA (7)]- Section 206AA not applicable in case of non-resident

The above provisions of section 206AA shall not apply to a non-resident, not being a company, or to a foreign company, in respect of—

(i)         payment of interest on long-term bonds as referred to in section 1 94LC; and

(ii)     any other payment subject to such conditions as may be prescribed. (See rule 37BC below)

[Rule 37BC]- Relaxation from deduction of tax at higher rate under section 206AA

[Rule 37BC(1)] :

In the case of a non-resident, not being a company, or a foreign company (hereafter referred to as ‘the deductee’) and not having permanent account number the provisions of section 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset, if the deductee furnishes the details and the documents specified in sub-rule (2) to the deductor.

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[Rule 37BC(2)] :

The deductee referred to in sub-rule (1), shall in respect of payments specified therein, furnish the following details and documents to the deductor, namely:

(i)         name, e-mail id, contact number;

(ii)     address in the country or specified territory outside India of which the deductee is a resident;

(iii)    a certificate of his being resident in any country or specified territory outside India from the Government of that country or specified territory if the law of that country or specified territory provides for issuance of such certificate;

(iv)    Tax Identification Number of the deductee in the country or specified territory of his residence and in case no such number is available, then a unique number on the basis of which the deductee is identified by the Government of that country or the specified territory of which he claims to be a resident.

Consequently, Form 27Q has also been amended.

Where assessee an Indian remits payments to company located in Singapore which is not a tax assessee in India, and tax relationship between two countries is regulated in terms of Indo-Singapore DTAA, rate of taxation would be as dictated by provisions of treaty and not under section 206AA.

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