The last date to apply for a PAN is March 31, after which you will have to pay higher TDS,
From the new financial year, assessees will have to pay a higher income tax at source if they do not have a Permanent Account Number (PAN). Tax at higher of the prescribed rate or 20 percent will be deducted on all transactions liable to tax deduction at source (TDS), if the person liable to the tax does not possess a PAN. The new provisions related to TDS under the Income Tax Act will become applicable with effect from April 1, 2010.
All those liable to pay the tax, including non-residents, need to obtain a PAN by March 31, 2010. This number has to be communicated to those liable to deduct tax before the tax is actually deducted on transactions after that date.
As such, all financial transactions without PAN will attract tax from April 1, 2010. The Income Tax Department has already made it mandatory for employers to quote PAN of their employees and parties from whom tax is deducted while filing TDS returns. The move of imposing penalty for not quoting PAN is aimed at strengthening the database of the revenue department and increasing tax compliance.
According to the new provisions, declaration by a taxpayer under Section 197A for non-deduction of TDS on payments will not be valid if it is given without quoting PAN. The certificate for deduction at a lower rate or no deduction will not be given by the assessing officer under Section 197 in the absence of PAN.
To avoid disputes regarding quoting, non-quoting of PAN or accuracy, all eligible for the deduction and those liable to deduct will be required to quote PAN in all correspondence, bills, vouchers and other documents sent to each other. If a person eligible for deduction fails to do so, he will have to pay 20 percent TDS instead of two percent on rental payments for plant and machinery and 10 percent on land and building.
PAN is a ten-digit alphanumeric number, issued in the form of a laminated card. It is mandatory to quote PAN on return of income, all correspondence with any income tax authority and challans for any payments due to Income Tax Department. It is also compulsory to quote PAN in all documents pertaining to economic or financial transactions notified from time-totime by the Central Board of Direct Taxes.
The effort is also seen as a step by the government to increase revenue collections. The 20 percent rate on TDS will be a deterrent and compel many to obtain and furnish PAN. Otherwise, it will directly impact their cash flows in terms of higher tax payout at source.
Those who still don't have a PAN should immediately apply for one before April 1, 2010.
