A does not have a PAN card and he opens a one-year MIS fixed deposit of Rs. 160000/- such that the monthly interest payable is Rs. 1224/-. The bank deducts 20% TDS as the estimated annual interest payable exceeds Rs. 10000/-.
Now, if A breaks the FD prematurely after six months, he does not stand liable to pay TDS as the total interest paid is about Rs. 7000/-. However, the bank says it cannot refund the tax deposited. Since, no PAN number is attached to the account, there is no way to get TDS refund from Income Tax Department too. Overall, A pays a tax of 20% even if the total interest he receives is less than Rs. 10000 in a year.
So, please advise if this is legally right? Is there an accepted way for solving this or is this a grey area in accounting practices and should be referred to RBI?
10 November 2015
Take a PAN and quote your PAN while entering into such financial transactions. Since 20% TDS is penal, it will never be in the interest of the Tax Payer.
CAclubindia
