In budget 2009 TDS rates are sought to be amended from 1.10.2009
Section 194C – Payment to Subcontractor
1% in case of Individual or HUF & 2% in case of others.
Section 194I – Rent
2% in case of machinery and 10% in case of land or building.
New Section – 206AA
A new section 206AA is being inserted to ensure PAN compliance.
It provides that any person who is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVIIB shall furnish his PAN to the person responsible for deducting such tax.
If there is a failure, then tax has to be deducted at the higher of the following rates:
(i) At the rate specified in the relevant provisions of this Act; or
(ii) At the rate or rates in force; or
(iii) At the rate of 20%.
So PAN is being made mandatory independently.
Now the question is on payment to foreign companies for whom TDS may be payable, if they do not have PAN should we deduct TDS at the highest rates? Most of them will not have PAN, so what will be the implications? Should they go in for PAN?
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