Quote PAN, or else pay 20% tax: Taxmen to contractors
Not quoting the permanent account number (PAN) can cost the contractors and sub-contractors dear, as the budget proposal of taxing them at up to 20 percent instead of 1-2 percent comes into effect from Tuesday.
New Delhi: Not quoting the permanent account number (PAN) can cost the contractors and sub-contractors dear, as the budget proposal of taxing them at up to 20 percent instead of 1-2 percent comes into effect from Tuesday.
The provision, made in budget 2009-10, is applicable from today and is aimed at plugging the loopholes leading to tax evasion and compelling more and more people to obtain PAN.
At present, contractors and sub-contractors pay TDS (tax deducted at source) in the range of 1 to 2 percent only. From today, income tax authorities could impose up to 20 percent on tax liability them, if they do not provide the PAN, Finance Ministry sources said.
The Ministry sources pointed out that in such a scenario, many small contractors and sub-contractors, who usually don`t furnish their PAN, would go unviable, forcing them to fall in line, the sources said.
Also, those who earn interest income from banks would also be required to furnish their PAN from today. Similarly, provision is applicable on royalty or technical fees paid by Indians to non-residents, which attract tax of around 10 percent at present.
These provisions would help in detecting tax evasion. Currently, only 3.3 crore people are under the income tax net because of massive non-reporting and underreporting of income and exemption.