Government to penalise TDS transactions sans PAN

From 1 April, transactions involving tax deduction at source (TDS) that are not accompanied by the permanent account number (PAN) of the assessee will be subject to the highest TDS rate of 20 per cent, according to a finance ministry notification on Wednesday.

''Tax at the higher prescribed rate or 20 per cent will be deducted on all transactions liable to TDS where the PAN of the deductee is not available,'' the statement said.

The provision has major implications for small contractors, small businesses, professionals and investors who earn interest from fixed deposits. The rate of TDS in these cases ranges from 1 per cent to 10 per cent.

All assesses will have to quote their PAN in their correspondences, bills, vouchers and other documents sent to each other. ''All deductors are, therefore, advised to intimate their deductees to obtain and furnish their PAN so as to avoid TDS at a higher rate,'' the statement said.

The law will also apply to all non-residents in respect of payments or remittances liable to TDS. ''All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by 31 March 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date,'' the ministry said.

Assesses who do not have a PAN will also not get a certificate from assessing officer about lower or no tax liability, the statement said.