You have to pay higher income tax at source with effective from 1st of April 2011 in cases where you have not given your PAN number to the payer. IT act has specified 22 items where the payer has to compulsorily deduct income tax from the income or payment that is paid to the payee. Every person receiving these amounts has to compulsorily furnish his/her permanent account number to the other person who is responsible for deducting TDS. Failure to do so will attract higher of the following rates as TDS;
- Rate and rates as specified in the income tax act or
- At the rate of 20%
You should intimate your Permanent Account Number to the person who is deducting tax from your income or payment. For example, all employees have to compulsorily get PAN card and intimate the same to their employer if their salary income exceed the basis exemption limit of income tax.
At present the regular rate of deducting income tax at source (TDS) is 1% to 10%. All these payments will attract TDS at a rate of 20% if for such transactions you have not provided Permanent Account Number to the payer.
It is also mandatory for all the employees to provide PAN if there income during the financial year increased or about to increase the basic exemption limit of income tax. Companies in India also started not paying salary to employees if Permanent Account Number has not been provided to them.
After deducting tax @ 20%, all the payers need to deposit the same with the IT department. Such TDS amount can be claimed by the tax payer as a deduction from the income tax liability while filling his income tax return at the end of the year.
Where the Permanent Account Number provided to the deductor/payer is invalid or does not belong to the payee (to whom you are making payment) then it will be treated as if such person has not produced PAN and accordingly TDS has to be deducted at a higher rate as specified above.
All senior citizens have to get there PAN from IT department. If there income is below the tax liability amount then they can file form 15H in addition to Permanent Account Number. Without a Permanent Account Number they will be charged with 20% of TDS on their income or payments received.
Above provisions are also applicable to non resident whose income or payment attracts TDS as per the provisions of IT act.
The idea behind such provision is to attract more peoples to get PAN card by which all financial transactions will be linked to PAN.
You have to quote pan in all correspondence with the IT department and for the transactions as specified under IT act.