The provisions relating to higher deduction or collection of tax at source in cases where Permanent Account Number (PAN) is not furnished have been restructured under the Income-tax Act, 2025. The earlier Sections 206AA and 206CC of the Income-tax Act, 1961 are now merged and covered under Section 397(2), effective from 1st April, 2026.
This restructuring retains the requirement for furnishing PAN for both TDS and TCS transactions and prescribes higher rates of deduction or collection in cases where PAN is not provided.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 397(2)
- Nature of Provision: Higher rate of TDS/TCS in case of non-furnishing of PAN
- Earlier Sections (IT Act 1961): Section 206AA and Section 206CC
Requirement to Furnish PAN
Every person:
- Receiving any amount on which tax is deductible; or
- Paying any amount on which tax is collectible
shall furnish his valid PAN to the person responsible for deducting or collecting tax.
Rate of TDS (Earlier Section 206AA)
A recipient who fails to furnish PAN shall be subject to TDS at the higher of the following rates:
- At the rate specified in the relevant provision of the Act; or
- At the rate or rates in force; or
- At the rate of 5% where tax is required to be deducted under Section 393(1) [Table: Sl. No. 8(ii) or 8(v)]; or
- 20% in any other case
Rate of TCS (Earlier Section 206CC)
In case PAN is not furnished, tax shall be collected at the higher of the following rates (not exceeding 20%):
- At twice the rate specified in the relevant provision of the Act; or
- At the rate of 5%
Note
- Declaration under Section 393(4) shall not be valid unless PAN is furnished by the person. Section 397(2) shall hence apply.
- Where PAN provided is invalid, it shall be deemed that PAN has not been furnished.
- Where the amount is below the taxable limit and not liable for deduction, this section shall not apply.
- PAN must be quoted in all relevant documents such as invoices, bills, and correspondence.
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