Starting from April 1, 2010, if your total income falls under any of the taxable slab, you are required to quote Permanent Account Number (PAN) in your financial transactions. Budget 2009-10 makes it mandatory to quote your PAN number in all correspondences with the tax authorities, a step taken to enhance transparency in the transaction and to ensure avoidance of tax evasion.
It is now mandatory for a taxpayer to quote his PAN number in the tax returns, bank deposits exceeding specified limits and mutual funds above a certain value among several other transactions which may demand PAN number quote of the party to the transaction.
Starting from FY 2010-11, Income Tax (IT) authorities could impose up to 20% of tax deducted at source (TDS) if the recipient of the income (including non-residents) fails to provide his PAN to the related deducting agency.
Currently, the regular rate of TDS under various different income heads ranges from 2% to 10%. If you do not furnish your PAN number – while filing the return or to the source of income deducting agency – you may now have to cough up to 20%.
The aim of the authorities, behind making PAN quote mandatory, is to ensure diligent disclosure and transparency of transaction on behalf of the tax payers, so that they can not render any unknown transaction as a secret which undergoes a tax-evasive step. The IT department has made it mandatory for employers to quote PAN of their employees while filing TDS returns.
Usually, an assessee pays tax in the assessment year on income earned in previous year which calls for a delay until the completion of the previous year. And, hence, TDS is deducted, at the source of the income itself, to recover such amount much earlier on certain notified nature and/or value of transactions such as Salary, Rental fee, Commission, Interest, etc.
The quote of PAN is also needed in all documents pertaining to transactions notified by the Central Board of Direct Taxes. The Finance Bill for 2009-10 says,
“The deductee (person from whose income tax is deducted), shall mandatorily furnish his PAN to the deductor failing which the deductor shall deduct tax at source at higher rates.”
If you do not have a PAN card as yet, its high time you do !