Tds

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amit agarwal (Querist)

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)

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)

23 November 2011 Yes, Agree

amit agarwal

amit agarwal (Querist)

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

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

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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