Tds

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This query is : Resolved

Jitendra M.Gurejani (Querist)

12 February 2013 Dear Respected Members,

Facts of the query: This query is with regard to the TDS, where the Assessee is getting the error in E-TDS returns after validating from fvu. The error is Invalid Employee/Party PAN:Error Code: 4009. The issue us arsing because we have the party where we have no PAN of that party and secondly their exemption Limit does not cross the Threshold Exemption Limit as prescribed by IT Act.In this subject, Could you give your solutions where the circumstances is
1. Party have no PAN No.
2. The Threshhold Exemption limit does not cross.
3. if it is having No PAN and exmeption limit cross as per IT Act then directly 20% gets deducted

Experts opinion is highly appreciated

CA Rinkal

CA Rinkal (Expert)

12 February 2013 it is to inform you that when the party has no PAN number and tDS deucted @ 20% then the deducted amount will not be claimed by the opposite party..

the deducted amount will gone in govt. treasury.

Jitendra M.Gurejani

Jitendra M.Gurejani (Querist)

12 February 2013 Dear Rinkal Mam,
Could you just explain in a more precise manner

Jitendra M.Gurejani

Jitendra M.Gurejani (Querist)

12 February 2013 Dear Members,

More replies from Experts are welcomed.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

27 July 2025 Great question! Here’s a clear explanation to address the TDS return error and the treatment of PAN and exemption limits:

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### Issue:

**Error in E-TDS return: Invalid Employee/Party PAN (Error Code 4009)** arises because:

* Deductor entered PAN of a party that does not exist or is invalid in the PAN database
* Or no PAN was available and no valid input was given
* Or mismatch in PAN format

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### Your situations:

1. **Party has no PAN number**
2. **Payment is below threshold limit (exemption limit)**
3. **Payment exceeds threshold but party has no PAN**

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### Solution and Explanation:

#### 1. **Party has no PAN and payment below threshold limit**

* **No TDS is deductible** because the payment is below the threshold limit for deduction as per the Income Tax Act.
* In this case, the PAN field in the TDS return should be **left blank or entered as “PAN not available”** as per TDS return filing instructions.
* The error can occur if you are forcibly entering an invalid PAN. You should leave the PAN field blank or use the **prescribed code for no PAN** in the software.
* Ensure that payment amount is indeed below the threshold.

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#### 2. **Party has no PAN and payment exceeds threshold limit**

* As per **Section 206AA**, if PAN is not furnished, the tax must be deducted at a **higher rate of 20%** (or the rate specified in the relevant section, whichever is higher).
* You should **deduct TDS at 20%**.
* For return filing, you must either:

* Enter the PAN as **"PAN not available"** or
* Enter the temporary PAN or TAN if available (some software allow this), but mostly leave PAN blank with valid remarks.
* Ensure software accepts this or you may need to update it.
* Deducting at 20% for non-PAN holders is mandatory; otherwise, TDS return gets rejected or error appears.

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#### 3. **General tips to avoid Error 4009**

* Always validate PAN before deducting TDS; use the official PAN verification utilities (NSDL or UTIITSL websites).
* If no PAN, enter **'PAN not available'** in the return properly without fabricating invalid PAN numbers.
* Use the latest version of TDS filing software to handle PAN exceptions correctly.
* Keep supporting documents ready if asked by the department for exemption limit validation.

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### Summary Table

| Situation | TDS Deductible? | PAN Status in Return | TDS Rate |
| --------------------------------- | ---------------------- | --------------------------- | ---------------------- |
| Party no PAN, payment threshold | Yes | PAN left blank or marked NA | 20% (higher rate) |
| Party with valid PAN | Yes if above threshold | Valid PAN | Normal applicable rate |

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If you want, I can help you draft a sample note or explanation for management or tax consultants to handle this scenario. Would that help?

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