PAN, Aadhar rule for Income Tax AY 2020-21

PAN and Aadhar rule for Income Tax

As per the latest circular issued by The Central Board of Direct Taxes (CBDT), now employees must declare their PAN or Aadhar details to employees for calculation of Tax deducted at source. In case the employee doesn’t furnish his PAN or Aadhar details, he may be liable to heavy taxation, much more than what was applicable. The employers are directed to deduct higher taxes at source for employees who fail to produce their PAN or Aadhar details. 

How is the tax calculated for employees without PAN or Aadhar? 

As per section 206 AA of Income Tax Act, every employee has to share PAN or Aadhar details, whichever may apply to their employers for calculation of TDS for the assessment year 2020-21. In case the employee fails to produce their PAN or Aadhar details, they may end up paying taxes higher than 20 percent of their income! As per the latest circular by CBDT, the employers of employees who fail to furnish their PAN or Aadhar details shall collect TDS at higher of following rates:

  • At the rate specified in the relevant provision of this Act
  • At the rate of rates in force
  • At the rate of 20 percent

The employers have to collect TDS at the rate which is higher than the above three mentioned rates. 

Further, CBDT circular states that for employees whose income is below the taxable limit as per section 192, don’t have to pay taxes. But for employees falling under higher income slab and who haven’t furnished their PAN or Aadhar details, the employer is supposed to calculate the average rate of Income-tax based on rates in force as provided in section 192. 

Also, health and education cess at a rate of 4 percent shall not be deducted from employees whose tax has been deducted at 20 percent u/s 206 AA of the Act.

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