Attention employees! CBDT says 20% of your salary will be deducted if you don't do THIS
PAN/Aadhaar rules for AY 2020: Are you a salaried person and earning over ₹ 2.5 lakh per annum? Then this news is important for you. The Income Tax Department has reiterated that employers must cut tax at source at 20 per cent or a higher rate if the employees do not provide PAN and Aadhaar details to the employer.
The Income Tax Department has asked employers to deduct 20 per cent salary as Tax Deducted at Source (TDS) from all employees who fail to furnish PAN and Aadhaar details.
This rule was formulated by the Central Board of Direct Taxes (CBDT) and came into effect on January 16. The rule will be applicable to those who earn more than ₹2.5 lakh per annum.
In a recent circular, the CBDT has advised employers that they procure and quote correct Aadhaar or PAN number of employees compulsorily as per the Section 206-AA of the Income Tax Act in the tax deducted at source (TDS) statements for salaries.
The circular reads: "Section 206AA in the Act makes furnishing of PAN or Aadhaar number, as the case may be, by the employee compulsory in case of receipt of any sum or income of amount, on which tax is deductible."
The circular states that if an employee fails to provide these details, the employer is responsible to make deductions either at the tax rate on the employee's salary or 20 per cent or above.
This rule is aimed at keeping a close eye on TDS payments and revenue earned by this segment. In the financial year 2018-19, revenue from this segment amounted to around 37 per cent of the total direct tax collection.
In case, the income is less than ₹2.5 lakh per annum, no tax will be deducted.
After several deductions, if your salary attracts approximately 20 per cent tax, the TDS rate of 20 per cent will apply.
In case your salary attracts a 30 per cent tax rate, your employer will compute the average tax rate, i.e, employee's total tax liability divided by total annual income. If the average tax rate turns out to be 20 per cent, the TDS would be 20 per cent.
However, employees will be exempted from paying education and health cess at 4 per cent rate in case the deduction made is at a higher rate.
The CBDT says the lack of PAN or Aadhaar details is creating problems in giving credit.
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