What is the new provision regarding mandatory quoting of PAN?

Finance (No.2) Act, 2009 (Act) with the introduction of new section 206AA in the Income-tax Act,1961 has made it mandatory for payers to withhold tax at higher rates if payee does not provide it’s Permanent Account Number (PAN).

As per this provision, if PAN is not updated or is incorrect, tax will be deducted at source at the higher of the following rates:

(i) At the rates prescribed in the Act; or
(ii) At the rates in force (which includes the tax treaty rates); or
(iii) At the rate of 20%.

Is this provision applicable even if the customer submits Form 15 H/Form G?

Yes, this provision is applicable even if the customer submits Form 15G/15H. Customer needs to furnish the PAN to avail the benefit available under Form 15G/15H.

Is this provision applicable to senior citizens also?

Yes, this provision applies to all assesses i.e. it is applicable to senior citizens as well.

In case the customer's interest income does not exceed the threshold; would this provision be applicable to him as well?

No, this provision is applicable only when tax is deductible under the provisions of the Income-tax Act, 1961. In cases where income credited or likely to be credited is not exceeding the threshold limit, this provision would not be applicable.

In case customer has not provided PAN and tax gets deducted at a higher rate, will Bank be able to reverse the same if PAN is provided by the customer subsequently?

No, when tax is deducted by the bank, it is duly deposited with the government within the applicable due date. Hence once tax is deducted at a higher rate, due to non-availability of the PAN at the time of deduction, the bank would not be able to reverse the same if PAN is provided by the customer post deduction of tax.

In case TDS is deducted at higher rates, will the customer be able to take refund from IT authorities if he provides PAN at the time of filing the return?

Yes, if customer has PAN at the time of filing of his return of income, then he can claim the excess tax amount deducted. Income tax authorities will scrutinize his claim and then issue the refund accordingly.

In case customer has applied for a PAN, can the Bank deduct TDS at the normal rate based on the PAN application?

No, unless the customer furnishes his PAN, the bank will not be able to deduct TDS at the normal rate on the basis of his PAN application.

In case customer does not have PAN, will he be able to place Fixed Deposit with Form 60?

Customer can place deposit with Form 60, however, interest accrued on his deposit will be liable for TDS at higher rates if (1) interest accruing on his deposit is exceeding the threshold limit on which tax is not deductible and (2) the customer has not submitted his PAN to the Bank.

Whether this provision applies to Non-resident also?

Yes, this provision is applicable to non residents also.

Can customer claim the benefit of lower rate of tax deduction on the basis of tax treaty even if he does not have PAN?

No, customer would not be eligible to claim the benefit under the tax treaty if he does not furnish the PAN.