Tds

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amit agarwal (Querist)
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23 November 2011 suppose i paid Rs.100000/- to contractor deducted Tds @2% (contractor is firm) , but contractor did'nt mentioned it's PAN, so while calcualting my business income , whether my whole expense will be disallowed or will i get proportionate deduction according to deduction to TDS?

CS, Deepak Pratap Singh

CS, Deepak Pratap Singh (Expert)
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23 November 2011 As per provisions of income tax act 1961 , in case of non mention of PAN the deductee has to deduct tax @20% from the payment held , but in your case u will get full deduction of expenses.

CA Ayush Agarwal

CA Ayush Agarwal (Expert)
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23 November 2011 Yes, Agree

amit agarwal

amit agarwal (Querist)
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24 November 2011 are you both really confirmed with your answers. i have paid this amount to a decorator,now what is your answer?

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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27 July 2025 Great question! Here’s the clear position under the Income Tax Act:

* When the **contractor (deductee) does not furnish PAN**, the **deductor is required to deduct TDS at 20%**, not at the usual 2%.
* If you have deducted TDS only at 2% instead of 20%, you are technically not complying with the TDS provisions.
* **However, for the purpose of computing your business income, your expense of Rs. 100,000 will still be allowed in full** (i.e., it won’t be disallowed proportionately).
* But, you may face interest or penalty for non-compliance due to incorrect TDS deduction.

**For your decorator case:**

* You must deduct TDS @20% since PAN is not furnished.
* If you deducted at 2%, you should correct this by paying the balance TDS along with interest.
* For your business income computation, you can claim full expense of Rs. 100,000.

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