Not furnishing your employer with your PAN and/or Aadhaar details for deduction of tax at source will now incur a greater penalty. According to a circular released recently by the Central Board of Direct Taxes, employees make have to pay as much as 20% of their income as tax in such cases.
Section 206AA of the Act makes it mandatory for employees to provide PAN or Aadhaar number in case of receipt of any sum or income or amount, on which tax is deductible.
To quote the circular, if an employee or deductee fails to furnish his/her PAN or Aadhaar number as the case may be, to the deductor, they have been made responsible to make TDS higher at the following rates:
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%.
According to the circular, the deductor has to determine the tax amount in all the three conditions and apply the higher rate.
However, nothing will be deducted if the income computed for TDS u/s 192 is below the taxable limit. In case the amount is higher, the income tax will calculate the average rate of income tax based on the given rates.
The circular adds, "If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to be deducted at the average rate".
Health and Education cess at 4% will not be deducted in case tax is deducted at 20%.
