20% tax in the absence of PAN/Aadhaar details

If employees fail to provide these details to their employers for TDS, they will end up paying over 20% of their income as tax.


It is compulsory for employees to furnish their PAN or Aadhaar card details to the employers for tax deduction at source (TDS), failing which they may end up paying over 20 per cent of their income as tax. This is in keeping with Section 206AA of the Income Tax Act.

A circular to this effect has been issued by the Central Board of Direct Taxes (CBDT). The coverage will be calculated by the employer as per the provisions of the Act, or whatever rate is in force, or at a rate of 20 per cent, whichever is higher.

In case the tax, after calculation, comes to less than 20 per cent, tax will be deducted at 20 per cent. If the average rate goes beyond 20 per cent, tax will be deducted as per the average rate. Once tax is deducted at the rate of 20 per cent, the four per cent health and education cess will not be deducted as per Section 206AA of the Act.

If the incomes of the employees are less than the levels at which tax can be levied, there will be no deduction of TDS.

According to the official circular, it is compulsory for employers to state the PAN or Aadhaar number of the employees whose income tax has been deducted in the statement furnished u/s 192(2C), certificates furnished u/s 203 and all statements that have been drawn and submitted as required by Section 200(3) of the Income Tax Act.

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