New Delhi: The Central Board of Direct Taxes (CBDT) has announced that employees will now have to pay 20% from their salary as tax if they fail to furnish their Permanent Account Number (PAN) and Aadhaar details to their employers. This new norm, which came into effect on January 16, will be applicable on those earning Rs 2.5 lakh per annum. Also Read - Union Budget 2020: Government Likely to Tweak Income Tax Slabs; Those Earning Between Rs 6-7 Lakh May be Taxed at 5%
With this move, the CBDT, according to reports, aims to keep a close eye on TDS (tax deducted at source) payments and revenue earned through it. TDS amounted to 37% of total direct tax collection in 2019. Also Read - Government to Decriminalise Income Tax Act, PMLA to Restore Business Confidence
A recent circular issued by the CBDT said that it is mandatory for employees to furnish Aadhaar and PAN card details under section 206A of the Income Tax Act for the amount on which tax deduction is applicable. “Section 206A in the Act makes furnishing of PAN or Aadhaar number as the case may be, by the employee compulsory in case of receipt of any sum or income or account on which tax is deductible,” the circular reads. Also Read - Want to Save Income Tax by Investing in Life Insurance Policies? Know How to do it Here
“Taxpayers are also liable to furnish their correct PAN or Aadhaar number as the case may be, to their deductors. Non-furnishing of PAN or Aadhaar number as the case may be, by the deductee (employee) to the deductor (employer) will result in deduction of TDS at higher rates under section 206AA of the Act,” the circular added.
In case an employee fails to furnish his/her Aadhaar/PAN details, the employer, as per the circular, can collect TDS as per the highest among the following rates:
- the rate specified in the relevant provision of the Income Tax Act
- rate or rates in force
- at a rate of 20%
However, employees will be exempted from paying health and education cess at 4% in case the deduction is made at a higher rate.