Section 206AA - Requirement to furnish Permanent Account Number - Income Tax - Ready Reckoner - Income Tax

Section 206AA : Requirement to furnish Permanent Account Number Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (i.e Section 192 to 206B except Section 194LC) , (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates (other than Section 194O and 194Q) (i) at the rates specified in the relevant provision of this Act; or (ii) at the rate or rates in force; or (iii) at the rate of 20%. In case of Section 194O and 194Q (i) at the rates specified in the relevant provision of this Act; or (ii) at the rate or rates in force; or (iii) at the rate of 5%. Exception of section 206AA The provisions of this section shall not apply in respect of payment of interest, on long term bonds, as referred to in section 194LC , to a non-resident or to a foreign company. No declaration under section 197A(1)/(1A)/(1C) shall be valid unless the person furnishes his Permanent Account Number in such declaration. In case any declaration becomes invalid under section 206AA(2), the deductor shall deduct the tax at source in accordance with the provisions of section 206AA(1). No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant. The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all the correspondence bills, vouchers and other documents which are sent to each other. Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of section 206AA(1) shall apply accordingly. Relaxation from deduction of tax higher rate u/s 206AA [ Rule 37BC ] Rule 37BC(1): - In the case of non-resident. not being a company, or a foreign company (referred as deductee) and not having PAN the provisions of section 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset, if the deductee furnishes the details and the documents specified in rule 37BC(2) to the deductor. Rule 37BC(2): - The deductee referred in sub-rule (1),shall in respect of payments specified therein, furnishes the following details and documents to the deductor:- name, e-mail id and contact number adress in the country or specified territory outside India of which the deductee is the resident a certificate of his being resident in any country or specified territory outside India from the government of that country Tax Identification Number of the deductee in the country of his residence and in case no such number is available, then a unique number on the basis of which deductee is identified by the Government of that country. Rule 37BC(3):- The provisions of section 206AA shall not apply in respect of payments made to a person being a non-resident, not being a company, or a foreign company if the provisions of section 139A do not apply to such person on account of Rule 114AAB. KEY NOTES: Where the amount paid is below the limit on which tax is required to be deducted at source and therefore, not liable for deduction of tax, and PAN is not furnished, then section 206AA has no applicability. This section over-rides DTAA. Section 206AA is applicable to payments made to non-residents and foreign companies. Important Circular and Notification 1. Issues - Non-applicability of higher rate of TDS/TCS as per provisions of section 206AA/206CC of the Income-tax Act, 1961, in the event of death of deductee/collectee before linkage of PAN and Aadhaar [ Circular No. 8/2024 dated 5th August 2024 ] Clarification - 3. In order to redress such grievances of the taxpayers, the Board, hereby specifies that in respect of cases where higher rate of TDS/TCS was attracted under section 206AA / 206CC of the Act pertaining to the transactions entered into upto 31.03.2024 and in case of demise of the deductee/collectee on or before 31.05.2024 i.e. before the linkage of PAN and Aadhaar could have been done, there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA / 206CC , as the case maybe. The deduction/collection as mandated in other provisions of Chapter XVII-B or Chapter XVII-BB of the Act, shall be applicable.