Section 206CC: Higher TCS Rate for Non-Furnishing of PAN

Section 206CC of the Income Tax Act, 1961 mandates a higher Tax Collected at Source (TCS) rate if the buyer (collectee) fails to furnish their Permanent Account Number (PAN) to the seller (collector). This provision ensures tax compliance by incentivizing PAN disclosure in high-value transactions.

1. Applicability

• Applies to all TCS transactionsunder Chapter XVII-BB (e.g., sale of scrap, minerals, liquor, overseas remittances, etc.).
• Exemptions:
  • Non-residents without a Permanent Establishment (PE)in India.
  • Government entities, embassies, and notified exempt transactions.

2. Higher TCS Rates

If the buyer does not provide PAN, the seller must collect TCS at the higher of:

• Twice the normal TCS ratespecified for the transaction, or
• 5%(or 1% for transactions under Section 206C(1H)).

Example:

• Normal TCS rate on scrap: 1%
• If PAN not provided: 5%(since 2×1% = 2% < 5%).

3. Consequences of Non-Compliance

4. PAN Validation & Documentation

• Seller’s Duty:
  • Verify PAN authenticity (via NSDL/ITD portal).
  • Quote PAN in invoices, bills, and TCS returns (Form 27EQ).
• Buyer’s Relief: Submit Form 27C(for manufacturing use) with PAN to avoid TCS.

5. Recent Updates (2025)

• Budget 2025: Section 206CCA(higher TCS for non-filers) omitted, but Section 206CC remains.
• E-invoicing: TCS must be included in invoices if PAN is missing.

Practical Implications

For Sellers

✔ Collect PAN upfront to avoid higher TCS liability.

✔ Deposit TCS by the 7th of the next month to prevent penalties.

✔ File Form 27EQ quarterly and issue Form 27D (TCS certificate).

For Buyers

✔ Always provide PAN to avoid excess TCS deductions.

✔ Verify TCS credits in Form 26AS/AIS and claim refunds if applicable.

✔ Use Form 27C if goods are for manufacturing (not trading).

Example Scenario

• Transaction: Purchase of scrap worth ₹10 lakh.
• Normal TCS: 1% (₹10,000).
• If PAN not provided: 5% (₹50,000).

Key Points

1. PAN is mandatoryfor TCS transactions; else, higher rates apply.
2. TCS credit is deniedif PAN is missing.
3. Sellers face penaltiesfor non-compliance.
4. Exemptions existfor NRIs without PE and government buyers.
5. Budget 2025removed Section 206CCA but retained Section 206CC.