Tax deducted on tech. services @ 10%

This query is : Resolved

T.S.Dhiman

T.S.Dhiman (Querist)
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07 December 2013 HELLO EXPERTS,
WE HAVE TAX DEDUCTED ON TECH. SERVICES @ 10% BUT PAN NOT AVAILABLE AND FILE THE RETURN WITHOUT PAN.AFTER SOME TIMES WE RECEIVED THE NOTICE U/S 154 FOR THE DEMAND OF EXTRA 10% TAX DEPOSIT.

WE HAVE REVISED THE TDS RETURN WITH PAN BUT THE DEPARTMENT RE-ISSUE THE NOTICE FOR DEMAND OD TDS FOR 10% EXTRA WITH INTEREST.

WE WANT TO KNOW THE PROCEDURE OF TDS LIABILITY NIL.

THANKING YOU,

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 December 2013 Yes in case of non quoting of Pan the rate is 20% so dept is correct u need to rectify u/s 154.

T.S.Dhiman

T.S.Dhiman (Querist)
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09 December 2013 Actually the tds amt is 80000/- Rs. .then it is loss of 80000/- in case we paid as 160000/- ..is there any way to escape..
and it is also noteworthy here that this tds was deducted on NRI payment..The mistake was just that we had filed the return without pan but no default in tds.
Please help .i shall be highly thankful to you.

w8ing for the replyys

T.S.Dhiman

T.S.Dhiman (Querist)
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Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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26 July 2025 Got it! Here's the situation summarized and what you can do:

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### Situation Recap:

* TDS was deducted on technical services payment to an NRI at 10%.
* PAN was **not available** at the time, so TDS was deducted (or filed) at **10% without PAN**.
* The return was filed **without PAN**.
* The department issued a **demand notice under Section 154** for extra 10% TDS (which happens because when PAN is not quoted, TDS rate is 20%).
* You revised the TDS return with PAN details.
* Still, the department demands the **extra TDS + interest** on the higher TDS rate.
* TDS amount deducted was Rs. 80,000; with the extra 10% demanded, effectively you may have to pay Rs. 1,60,000, causing a loss.

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### What’s going on legally?

* **Section 206AA** mandates that if PAN is not provided, TDS shall be deducted at the higher rate (usually 20%).
* Since PAN was missing when you filed, the department treats TDS at 20%, hence the extra 10% demand.
* Even if you later submit PAN, the default stands unless corrected properly.
* For payments to NRIs, the tax deducted is final in many cases, but PAN compliance is still mandatory for correct TDS rate.

---

### Is there a way to avoid paying the extra 10% TDS?

**Options to explore:**

1. **Rectification or Appeal:**

* File a **rectification request under Section 154** explaining the situation.
* Attach proof that PAN was submitted later, and TDS was deducted correctly at 10%.
* Sometimes the department can waive the extra demand if convinced.
* If rectification fails, file an appeal with the Commissioner (Appeals).

2. **TDS Refund Claim:**

* If the department doesn’t accept, pay the demanded amount but **file your income tax return claiming refund** of the excess deducted TDS.
* This can take time but you can recover excess payment via refund.

3. **Proof of Correct Deduction:**

* Ensure you have **payment vouchers, TDS certificates (Form 16A)** showing tax deducted at 10%.
* Submit these as evidence during rectification or appeal.

4. **Legal Consultation:**

* Since this involves NRI and international tax, get specialized tax advice.
* DTAA provisions may also impact tax rates and TDS.

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### Important Notes:

* The department is strict about PAN compliance; missing PAN leads to automatic 20% TDS rate.
* Merely filing return without PAN triggers this penalty; providing PAN later may not fully reverse demand.
* Timely submission of PAN before deduction is key to avoid such issues.

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