The Income Tax Department has reminded the employers that they are to deduct tax at source at 20% or a higher rate if employees fail to disclose their Permanent Account Number (PAN) or Aadhaar number.
In a recent circular, the Central Board of Direct Taxes (CBDT) has asked the employers that they get and mention the correct PAN or Aadhaar number of employees in the tax deducted at source (TDS) statements for salaries.
As per the Income Tax Act, people who are getting an income are required to provide PAN and Aadhar to their employer, failing which a deduction on the taxable income may be made at the applicable rate specified in the Act or is in force or at 20%, whichever is higher.
This circular was issued last week. Where companies prepare their accounts for the financial year end, said employers have to assess tax dues in all scenarios and deduct the highest of all. If the average rate of income tax based on the rates in force is below 20%, then the deduction of TDS should be 20%. If the average rate is more than 20%, TDS is deducted at the average rate, said the circular. It also said the 4% health and education cess need not be deducted if TDS is done at the rate of 20%. If the income of the employee is below the ₹2.5 lakh taxable limit, no TDS is required.
Income Tax department has made it mandatory for the employees to provide aadhar and PAN details for TDS.