TDS for Salary below Basic Exemption Limit

This query is : Resolved 

09 March 2011

I have 3 employees each drawing a monthly salary of Rs.5,000/- each. Thus the Annual Salary Income of them shall be Rs.60,000/- each person. I came to know that w.e.f. 1-4-2010, that the employer shall have to deduct at the slab rates for Income Tax or 20% w.e.h., if the employee do not furnish his PAN, even if his taxable income is less than the Basic Exemption Limit. None of my employees have furnished their PAN upto the month of feb 2011. What are the tax consequences in my hand? Whether I shall have to collect back that 20% as TDS for the previous months? If not will it be disallowed in my assessment?

09 March 2011

TDS is required to be deducted of that employee whose income is going to become taxable in the financial year.

In your case there is no requirement to deduct TDS.

Nor, your employees are required to furnish PAN No to you.

Tax Payer (Querist)
09 March 2011

But in the CA Journal for the Month of March 2011 page 1384 the author has mentioned that PAN must be furnished by the employee even if his income is less than the Basic Exemption Limit. Else the employer shall have to deduct Tax at 20%. Could you please verify the same and confirm me sir?

Ravikant (Expert)
10 March 2011


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