You can go through the details described below.
Section 260AA of Income Tax
Section 260AA of the Income Tax Act provides that in the case of TDS deduction, if a Permanent Account Number (PAN) is not provided, TDS will be deducted at a higher rate of 20%. This rule applies to every assessee, whether they have salary income or not.
However, what happens when the deductee's income is below the exemption limit under income tax? If the deductee does not have a PAN and has income below the exemption limit, will the tax still be deducted at a higher rate?
- If the assessee furnishes Form 15G or 15H to declare that their income is below the exemption level, they need to attach a photocopy of the PAN.
- Is having a PAN number a must in India, such that without it, one cannot have a fixed deposit in banks?
- What do income tax rules say about the PAN number? Is it necessary for every individual, regardless of whether they have any income?
Income Tax Section 139A provides that it is not necessary to have a PAN card for people whose income is below the exemption level.
In this regard, the Karnataka High Court has decided that TDS cannot be deducted at a higher level for a person who does not have a PAN and has income below the exemption level. The Honourable High Court adds some points as follows:
• Section 206AA makes it conditional for every person who wishes to have a transaction in banks/financial institutions, including small investors/depositors (i.e., investors/depositors with income below the taxable limit), to invariably have a PAN. This runs counter to Section 139A, according to which such persons need not have a PAN.
• Section 206AA hinders and discourages such small investors from coming forward to invest their money for secure reasons and their secure future. This is also not desirable for the country's economy.
• Further, Section 206AA is unreasonable as it invalidates Form 15G, which does not mention PAN.
• Section 206AA, which overrides Section 139A, is discriminatory against small investors. Section 139A has withstood scrutiny under Article 14 of the Constitution for reasonableness.
Dear Karthik,
How did you calculate the annual income of Rs. 2,40,000.00 for that individual? As per your calculation, Rs. 9,600.00 is in Conveyance Allowance, Rs. 15,000.00 in Medical Allowance, and Rs. 2,400.00 in Professional Tax. The total exemption is Rs. 27,000.00, leaving a taxable amount of Rs. 13,000.00.
So, it is mandatory to deduct TDS on Rs. 13,000.00.