20% TDS if employee doesn’t share PAN or Aadhaar: I-T dept

NEW DELHI: The government has made it mandatory for employees, who are subjected to tax deducted at source (TDS), to share their permanent account number or Aadhaar, or face the prospect of a mandatory 20% deduction from their salary.

In the latest TDS circular on salaries issued by the Central Board of Direct Taxes (CBDT), Aadhaar has been added to the rules after the government amended the law to mandate that those without PAN can quote their Aadhaar.

“Even now, in case you do not share your PAN, the employer or the bank has to deduct tax at the specified rate. Now, Aadhaar has been added to the rules,” explained a tax officer.

While almost all employees share their PAN number with their employers, there may be some who may not be willing sharing it. “It’s procedural,” added another officer.

In the last Budget, the government had amended the law to make sharing of Aadhaar mandatory in case someone does not have a PAN. The two numbers had been made interoperable. In case someone does not have a PAN and gives her Aadhaar number, the tax department automatically generates PAN.

“The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS. However, where the income of the employee computed for TDS… is below taxable limit, no tax will be deducted. But where the income of the employee computed… is above taxable limit, the deductor will calculate the average rate of income tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to be deducted at the average rate,” it said.