Section 206CC of ITA, 1961 : Section 206Cc: Requirement To Furnish Permanent Account Number By Collectee

Explanation using Example

Imagine a scenario where a company, XYZ Pvt. Ltd., is purchasing scrap metal from various vendors and is required to collect tax at source (TCS) under Chapter XVII-BB of the Income-tax Act, 1961. One of the vendors, Mr. Kumar, is supposed to provide his Permanent Account Number (PAN) to XYZ Pvt. Ltd. before the transaction is completed.

If Mr. Kumar fails to furnish his PAN to XYZ Pvt. Ltd., the company must collect TCS at a higher rate. This means that instead of collecting tax at the rate specified in the Act for such transactions, XYZ Pvt. Ltd. must collect tax at either twice that rate or at the rate of five per cent, whichever is higher.

Furthermore, if Mr. Kumar provides a declaration to XYZ Pvt. Ltd. to collect tax at a lower rate without including his PAN, this declaration would be invalid. In such a case, XYZ Pvt. Ltd. must collect TCS at the higher rate as mentioned above.

Also, if Mr. Kumar applies for a lower TCS certificate without his PAN, his application will not be granted.

Both Mr. Kumar and XYZ Pvt. Ltd. are required to mention the PAN in all their documents related to the transaction. If the PAN provided by Mr. Kumar is found to be invalid or not belonging to him, it will be considered as if he has not furnished his PAN at all, and the higher rate of TCS will apply.

This section does not apply to non-resident vendors who do not have a permanent establishment in India.