Compulsory Requirement to furnish PAN by employee (Section 206AA):
4.8.1 Section 206AA in the Act makes furnishing of
PAN by the employee compulsory in case of receipt of any sum or income
or amount, on which tax is deductible. If employee (deductee) fails to
furnish his/her PAN to the deductor, the deductor has been made
responsible to make TDS at higher of 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 twenty per cent.
The deductor has to determine the tax amount in all the
three conditions and apply the higher rate of TDS. However, where the
income of the employee computed for TDS u/s 192 is below taxable limit,
no tax will be deducted. But where the income of the employee computed
for TDS u/s 192 is above taxable limit, the deductor will calculate the
average rate of income-tax based on rates in force as provided in sec
192. 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. Education cess @ 2% and Secondary and
Higher Education Cess @ 1% is not to be deducted, in case the TDS is
deducted at 20% u/s 206AA of the Act.
