INVESTOR EDUCATION SERIES-Quoting PAN will help in lesser TDS on your interest on depoits-VRK100-03012010

INVESTOR EDUCATION SERIES

QUOTING PAN WILL HELP IN LESSER TDS ON YOUR INTEREST ON DEPOSITS

It has become mandatory for term deposit holders to quote their PAN (permanent account number) with effect from April 1, 2010. This has become made compulsory by the Income Tax Department, Government of India as per Union Budget announcement on July 6th, 2009.

If any deposit account holder does not submit his/her PAN number to the bank/financial institution/company concerned before April 1st, 2010; tax will be deducted at source (TDS) from that date on the interest to be paid by these organisations to the deposit holders at much higher rate of 20 per cent or more.

Till now, one can avoid TDS by submitting Form 15-H (for Senior Citizens of age 65 years or more-Income Tax Act defines a senior citizen as a person of 65 years or more) or Form 15-G (for persons below the age of 65 years) as the case may be to post office/bank. This form may be given at the time of deposit itself. This will undergo a radical change wef April 1, 2010 as stated above.

As such, it is advisable for all (who keep term deposits in banks, financial institutions, NBFCs or companies) to apply for PAN and submit the same to the bank/company concerned. If the PAN number is not quoted; all interest payment would be subjected to TDS at much higher rate of 20 per cent or more wef April 1, 2010.

PAN APPLICATION:

PAN application can be obtained from:

1. http://www.incometaxindia.gov.in/

OR,

2. http://www.utitsl.co.in/

OR,

3. http://www.nsdl.com/

PAN application can be made online through the websites of UTITSL or NSDL. And payment of fee can be made by credit card or cheque or demand draft.

This is for the benefit of all the deposit holders concerned and general public.

with regards,

Rama Krishna Vadlamudi

ADDITIONAL READING:

Applicable to Salaries too: The new introduced section 206AA, (as per Finance Act 2009) clearly states, TDS eligible payments covered under Chapter XVII-B, needs compulsory Valid PAN, failing to which, TDS should be made at higher rate. Chapter XVII - B (Chapter 17B) of Income Tax Act covers all Payments including Salaries. So, Salaries are not excluded by Section 206AA.

Also for Non Resident Payments: Section 206AA applies for the payments being made to Non Residents. In those cases, foreign residents should take an Indian PAN and provide it, before the payment is being made by the Party.

Form 15H and Form 15G: In case of certain payments (Eg: Interest), where party was allowed to declare on Form 15G / 15H for non-deduction of tax, earlier many were not used to provide PAN. But, newly introduced section, makes such payments, if eligible for TDS, to compulsory quote the PAN. This means in such case where PAN is not-available/invalid, TDS has to be charged at higher rate, not ZERO irrespective of Form 15G / 15H.

Assessing Officer Certificate u/s 197:  If a Deductee proves under certain circumstances and Assessing officer is satisfied by the justification, assessing officer can issue a certificate u/s 197 for a TDS at lower rate or at ZERO rate. The Section 206AA, makes it compulsory to assessing officer for collecting valid PAN, before issuing such certificates. That means, Assessing officer will not provide certificate for lower/non deduction u/s 197, if applicant Deductee fails to provide his/her valid PAN.