Section 206CC | Mandatory Requirement of Furnishing PAN

CA.R.S.KALRA | Last updated: 25 March 2021

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Section 206CC of the Income Tax Act mandates that individuals making payments subject to Tax Collection at Source (TCS) must provide their Permanent Account Number (PAN) to the tax collector. Failure to do so will result in TCS being collected at a higher rate: either double the applicable rate or 5%, whichever is greater. This rule also applies if a declaration form is submitted without a PAN, or if an invalid PAN is provided. The PAN must be included in all related correspondence and documents.

206CC.

(1) Notwithstanding anything contained in any other provisions of this Act, any person paying any sum or amount, on which tax is collectible at source under Chapter XVII-BB (herein referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall be collected at the higher of the following rates, namely:

at twice the rate specified in the relevant provision of this Act; or
at the rate of five percent

(2) No declaration under sub-section (1A) of section 206C shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) In case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at source in accordance with the provisions of sub-section (1).

(4) No certificate under sub-section (9) of section 206C shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

Furnishing PAN for Tax Collection at Source: Section 206CC

(5) The collectee shall furnish his Permanent Account Number to the collector and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

(6) Where the Permanent Account Number provided to the collector is invalid or does not belong to the collectee, it shall be deemed that the collectee has not furnished his Permanent Account Number to the collector and the provisions of sub-section (1) shall apply accordingly.

(7) The provisions of this section shall not apply to a non-resident who does not have permanent establishment in India.

Explanation. - For the purposes of this sub-section, the expression "permanent establishment" includes a fixed place of business through which the business of the enterprise is wholly or partly carried on

Section 206CC has been inserted to provide that any person whose payments are subject to tax collection at source i.e. the collectee, shall mandatorily furnish his PAN to the collector failing which the collector shall collect tax at source at higher of the following rates –

At twice the applicable rate of TCS or
At the rate of 5%

This section further provides as under:

No certificate under section 206C (9) will be granted by the Assessing Officer unless the application contains the PAN of the applicant.
Tax is required to be collected at the rates (as suggested under this section) also in cases where the collectee files a declaration in Form 27C [[under section 206C(1A)] but does not provide his PAN.
If the PAN provided to the collector is invalid or it does not belong to the collectee, it shall be deemed that the collecctee has not furnished his PAN to the collector. Accordingly, tax would be collectible at the highest of the two rates specified above.
Both the collector and the collectee have to compulsorily quote the PAN of the collectee in all correspondence, bills, vouchers and other documents exchanged between them.
The provisions of this section shall not apply to Non-resident who does not have permanent establishment in India. For this purpose, the expression "permanent establishment" includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.

FAQ :

Section 206CC requires any person making payments subject to Tax Collection at Source (TCS) to furnish their Permanent Account Number (PAN) to the person collecting the tax.

If the PAN is not provided, the tax collector must collect tax at source at the higher of two rates: twice the rate specified in the relevant provision or 5%.

Yes, a declaration under Section 206C(1A) is invalid unless the person furnishes their PAN. If the PAN is not provided, tax will be collected at source as per Section 206CC(1).

If the PAN provided is invalid or does not belong to the person making the payment, it is considered that the PAN has not been furnished, and the provisions of Section 206CC(1) will apply.

Yes, the provisions of this section do not apply to non-residents who do not have a permanent establishment in India.