T.DS. @ 20% IF PAN NOT QOUTED – APPLICABLE EVEN ON SUBMISSION OF FORM NO. 15G

T.DS. @ 20% IF PAN NOT QOUTED - APPLICABLE EVEN ON SUBMISSION OF FORM NO. 15G

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T.DS.

Query 1]

We request to seek your opinion on the following points:-

Finance Act- 2009 has substituted new Section 206AA in the Income Tax Act -1961. This section provide quoting of PAN in TDS Certificates / Returns by all deductees failing which the Deductor will be liable to deduct tax at source @ 20%. The provision of Section 197A for the furnishing Declaration 15G or 15H will be also meaningless in absence of furnishing the PAN.

In lieu of the above provision, we want to know the following:-

  1. Whether this provision relates to each and every category of TDS items stipulated in the Act or not or only to Section 194C & Section 194-I are covered under new provision?
  2. The TDS under the IT Act is to be done on the basis of prescribe rates which crosses the fix limit of incomes in each category. As per law, the TDS is to be done by the payer on payment of certain sum or income or amounts, which are cover by chapter XVII B and which crosses the fix specifies limit.
  3. Since the new Section 206AA has been make operative w.e.f. 01.4.2010 only, but in lieu of point No. 2 when any person pays or credit any sum or income or amount within F.Y. 2009-10 even on the last date of the year i.e., 31.3.2010 & deduct the TDS amount on 31.3.2010 but pays the same in the next year during stipulated time as allowed in the Act, then whether TDS rate would be 20%?  Kindly confirm me with your expert opinion in lieu of the above clause 3, whether the new provision will apply to the old period of receipt or credit of any sum or income. Please quote any judicial verdict on this score if any. It will be of great importance to a large number of personals, if your elaborate opinion is place for the benefit of assesses. [makharia75@yahoo.co.in]

Opinion:

  1. In order to strengthen the PAN mechanism, a new section 206AA has been inserte with effect from April 1, 2010. For common benefit, the highlight of the new section 206AA are give below –

    a) Every person whose receipt are subject to deduction of tax at source (i.e. the deductee) shall furnish its PAN to the deductor. It will be compulsory from 01.04.2010.
    b) If such person does not furnishes PAN to the deductor, the Deductor shall be require to deduct tax at source at higher of the following rates-
    i)   At the rate prescribed in the Act.
    ii) At rate in force, i.e. the rate mentioned in Finance Act.
    iii) At the rate of 20%.|c) The provision that TDS would be deductible at the above- mentione rates, will    also apply in cases where the deducte files a declaration under section 197A in form No 15G but he does not provide his PAN .
    d) No certificate under section 197 will be grante by the Assessing Officer unless the application contains Permanent Account Number of the Applicant.
    e) These provisions also apply to Non Resident where TDS is deductible on payments or credit made to them.
    f) To ensure that the deductor know about the correct PAN of the deductee, there is a provision for mandatory quoting of PAN of the deductee by both the deductor and the deductee in all the corresponding bills and voucher exchanged between them.
    g) In the case of payment to a transport operator tax will not be deductible under section 194C if the transport operator furnish his PAN to the deductor. If PAN is not furnished the rate will be 1% for an individual/HUF transporter & 2% for the other transporter during 01.10.2009 and 31.03.2010 and 20% after 31.03.2010.

  2. The provision applies to all categories of tax payment which attracts T.D.S. (including payment u/s 194C / 194-I).
  3. Tax is deductible at source AT THE TIME
    i) of payment or
    ii) at the time of credit in the books of accounts,
    whichever is earlier.
    In case tax is deducted on or before 31.03.2010 [by reason of clause 3 (ii) as mentioned above], section 206AA will not be applicable even though the payment is made after 31.03.2010.

Query 2]

  • Sir, In The Tax-Talk column of Hitavada date 25.01.2010, you had said that as regards to LTCG from sale of house property, the “Sale consideration is to be take as higher of the sale price as mention in the sale deed or the value adopt by the Registrar for the purpose of levy of stamp duty”. Will this same provision apply also for determining the cost of acquisition of the house property?
    In the case of the house property that I inten to sell, in the Sale Deed that was execute at the time of registration (purchase) of the house in my name, the purchase value adopt for determining the Stamp Duty (expresse as the “Market Price” in the Sale Deed) was higher by Rs. Three Lacs than the price I paid for the house. If the higher value (by Rs Three Lacs) can be taken for calculating the LTCG, it would be to my advantage in calculating the tax due on it, or in determining the amount that is to be investe to avoid tax. Could you please tell me if I can do that?
  • There is another query on which I request clarification. Actual payment for the house was make fully in 1994 but the registration in my name is done only in 2005. I have receipts sign by the previous owner in 1994 to prove the payment but not a Sale Deed because the registra is done only in 2005. If I can calculate the LTCG on the basis of the cost of acquisition as in 1994, the indexed cost when I sell the house will be higher (because the denominator will be of a lower value) and LTCG will be lower. Can I claim the higher indexed cost of acquisition on the proof of the Payment Receipts? [R.Varadarajan]

Opinion:

  1. The cost of acquisition, for computing, capital gain is the price for which the property is purchase and not value adopte by the Registrar of stamp duty at the time of purchase. Section 50C deems the value adopted by the Registrar of stamp duty (if it is higher than the actual sale Price) as the sale consideration. Section 50C has applicability only for seller and not for buyer. No consequent deeming provision is there for adopting the same as purchase price in the hands of buyer.
  2. Indexation benefit is available from the financial year in which the property is purchase /own by the assessee. You have already made the payment for purchase of the property in 1994. In addition to payment, if it can be prove that the possession/ legal right is hand over to you in 1994 itself, than the same can be consider as the year of purchase for indexation benefit. In normal course, not necessarily always, sale deed is consider as the year of purchase of property for indexation benefit.

T.DS.


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