PAN is the basic ‘penetrating needle’ for the Income tax Department to rope in every income earning person. It is a fact that our taxbase continues to be a major concern for policy makers. And in order to widen the taxpayers’ base the I-T Department intends to ride the vehicle of PAN in a big way. Once a common identifier like PAN is realised as a taget, it would quickly facilitate dematerialisation of the TDS.
To achieve these targets, the Union Budget 2009 shows some palpable signs of impatience and has thus opted for some draconian provision. PAN-quoting has been made mandatory for TDS deductors and if a deductee fails to provide the same, the penal rate of 20% TDS will immediately come into force. If one misquotes one’s PAN or errs in putting the same, how will the hapless deductors know so? There is no answer to it but the tax credit will be disallowed and the deductors will also face the music for deducting lesser TDS by merely presuming that the PAN quoted by them is correct.
Even a non-resident will not be spared even though under section 139A and the rules made thereunder, a non-resident is not required to mandatorily obtain a PAN. May be someone has forgotten to make an amendment in the main Section.
But where are these amendments in the Budget?
Hidden in the budget documents is this stern provision. Section 139A of the Income-tax Act which comes under chapter XIV prescribing the procedure of assessment, is a longish section laying down the requirement of obtaining and quoting of PAN in different situations. One would have thought that any changes relating to PAN would have been found in this section. Sub section 5A of this section lays down the obligation of providing PAN by the deductees of TDS to the deductors. This was introduced by the Finance Act, 2001.
One may also recall that right from 2004, the Government has been trying to introduce the concept of dematerialization of the TDS. One of the roadblocks in this attempt has been the fact that deductors cannot do much if PAN is not provided by the deductees resulting in a mismatch. Government first tried to bulldoze its way through by issuing two circulars. Having failed in its attempt and facing the ignominy of having to withdraw or suspend its circular, the North Block Mandarins have now come up with a novel way of improving compliance with provisions of quoting PAN through TDS regime.
It is now provided in the newly inserted section 206AA that unless the deductees provide PAN, the deductors are required to deduct tax which may be as high as 20% of the income. It has been further provided that despite declaration under section 197A in form 15G or 15H tax will be deducted at higher rate if PAN is not quoted therein. A firman has also been issued to the AOS not to issue any certificate of non-deduction or deduction at a lower rate unless PAN is quoted. And what happens when someone misquotes his PAN? It shall now be deemed that he has not quoted his PAN and tax will have to be deducted at the higher rate. And how does the hapless deductor know that someone has misquoted his PAN? There is no answer but the law requires to address this sticky problem as no law can punish one for no fault of the deductor. If it does, it would lose the force which comes from willingness to comply with the law!
In the Media Industry, several payments are to be made to overseas entities Eg.Google, MSN etc. I would like to know the TDS implication u/s195 read together with 206AA where payment is to be made to such a Foreign entity which does not have any place of office in India but has rendered services in terms of either hosting advertisement material of an advertiser client on its website and where the foreign entity also does not have a PAN no.but produces a Tax Residency Certificate. Eg. MSN ( US Based) has rendered the service to a local Indian entity say Godrej Industries Ltd. by placing its Ads on its website through an Advertising Agency say WebIndia Ltd. of Godrej. And MSN bills WebIndia in USD and also states that it does not have a PAN no. But MSN has a Tax Residency Certificate and has appointed a collection agent locally in India say ABC Ltd.which has a PAN No. , to coordinate with the Agency and merely collect payments from the Agency on behalf of MSN. There is also a specific clause by MSN which states that , if TDS is applicable then the TDS Cert.must be issued in the name of MSN though the cheques are to be drawn in the name of ABC Ltd. So WebIndia issues Release instructions to MSN to release Godrej Ins. Ads on its ( MSN) website on certain dates. MSN bills WebIndia in USD and asks WebIndia to pay ABC Ltd. ( Collection agent in India of MSN). WebIndia then Raises a Bill on its client Godrej Inds.Ltd. in INR to recover the cost of the Release. Is WebIndia liable to deduct TDS ? If yes , then at what rate ? 20% ??. Also will there be a violation of FEMA by WebIndia for paying locally in INR when it should have remiited in USD had there been no Collection Agent appointed.? Thirdly, Is WebIndia liable to charge Service tax when it Bills Godrej Industries Ltd. for release of ads on MSN. ?
plz reply as soon as possible……..
dear sir,
1)I wants to know the consequence of non qouting the pan no. at the time of purchase and sale of motor car.plz sir give rply from both point of view i.e.
buyer and seller.
2) what will be consequence if a trader who deals in motor car does not take pan no. of buyer at time of sale?
Kindly go to tin site or else you can ask anybody .anuj106@gmail.com
Dear sir,
What is the procedure for getting PAN for Non- Resident Company. (since we are paying the professional fee to the Non- Resident Company
Till now I have been quoting my individual PAN number for TDS on bills issued for prorpietorship concern and credit reflects in my individual name. Now what should a deductor do. Should he quote my individual name or my proprietorship name as shown on the bill while depositing my TDS?
In this case, deductee should submit photo copy of PAN Card with deductor and acknowledge the same. If PAN of deductee wrongly quoted by deductor, the deductor should penalised for that and not deductee.