My buyer will not give me his PAN. At what rate do I have to collect, and is there any ceiling?
Section 206CC(1) requires a collectee to furnish his PAN to the collector, failing which tax is collected at the higher of twice the rate specified in the relevant provision and five per cent. A proviso caps the rate: 'the rate of tax collection at source under this section shall not exceed twenty per cent.' That cap matters most on s.206C(1G), where twice the twenty per cent rate would otherwise produce forty per cent.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2023-07-01, reported as Income-tax Act, 1961, s.206CC, with the proviso to sub-section (1) inserted with effect from 1 July 2023. It bears on section 206CC, section 206C, section 206C(1A), section 206C(9), section 206C(1G) of the Income Tax Act 1961, in TDS Defaults, How Tax Law Is Read and Demand, Recovery & Stay matters.
The cap is easy to miss, and without it the arithmetic on a no-PAN LRS remittance is punitive. The section also has three consequences beyond the rate that catch collectors. Sub-section (2) makes a s.206C(1A) declaration invalid unless the buyer's PAN is furnished in it, and sub-section (3) then requires collection at the sub-section (1) rate — so a Form 27C without a PAN is not merely defective, it revives the whole collection duty. Sub-section (4) bars a lower-collection certificate under s.206C(9) unless the application contains the applicant's PAN. Sub-section (6) treats an invalid PAN, or one that does not belong to the collectee, as no PAN at all — which is where an inoperative PAN under the Aadhaar-linking rules bites the collector for a shortfall he could not have detected at the counter. Sub-section (7) takes the section off a non-resident who has no permanent establishment in India, the Explanation defining permanent establishment to include a fixed place of business through which the business of the enterprise is wholly or partly carried on.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Sub-section (1) provides that notwithstanding anything in any other provision of the Act, any person paying any sum or amount on which tax is collectible at source under Chapter XVII-BB (the collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (the collector), failing which tax shall be collected at the higher of (i) twice the rate specified in the relevant provision of the Act, or (ii) five per cent, with a proviso that the rate of tax collection at source under the section shall not exceed twenty per cent. Sub-section (2) makes a declaration under s.206C(1A) invalid unless the person furnishes his PAN in it; sub-section (3) requires collection under sub-section (1) where a declaration becomes invalid; sub-section (4) bars a certificate under s.206C(9) unless the application contains the applicant's PAN; sub-section (5) requires both collectee and collector to indicate the PAN in all correspondence, bills, vouchers and other documents sent to each other; sub-section (6) deems a PAN that is invalid or does not belong to the collectee to be no PAN; and sub-section (7) disapplies the section to a non-resident who does not have a permanent establishment in India, the Explanation providing that 'permanent establishment' includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.
Where the collectee does not furnish his PAN, tax is collected at the higher of twice the specified rate and five per cent, subject to a ceiling of twenty per cent. A s.206C(1A) declaration without the buyer's PAN is invalid and the full collection duty revives; an invalid PAN or one not belonging to the collectee is treated as no PAN; and the section does not apply to a non-resident without a permanent establishment in India.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the commencement of the proviso taken from the footnote printed on one of them.
Provided that the rate of tax collection at source under this section shall not exceed twenty per cent.
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Handle my notice → Ask a CA on WhatsAppSection 206CC(1) requires a collectee to furnish his PAN to the collector, failing which tax is collected at the higher of twice the rate specified in the relevant provision and five per cent. A proviso caps the rate: 'the rate of tax collection at source under this section shall not exceed twenty per cent.' That cap matters most on s.206C(1G), where twice the twenty per cent rate would otherwise produce forty per cent. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 206CC, section 206C, section 206C(1A), section 206C(9), section 206C(1G) of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.206CC, with the proviso to sub-section (1) inserted with effect from 1 July 2023. The cap is easy to miss, and without it the arithmetic on a no-PAN LRS remittance is punitive. The section also has three consequences beyond the rate that catch collectors. Sub-section (2) makes a s.206C(1A) declaration invalid unless the buyer's PAN is furnished in it, and sub-section (3) then requires collection at the sub-section (1) rate — so a Form 27C without a PAN is not merely defective, it revives the whole collection duty. Sub-section (4) bars a lower-collection certificate under s.206C(9) unless the application contains the applicant's PAN. Sub-section (6) treats an invalid PAN, or one that does not belong to the collectee, as no PAN at all — which is where an inoperative PAN under the Aadhaar-linking rules bites the collector for a shortfall he could not have detected at the counter. Sub-section (7) takes the section off a non-resident who has no permanent establishment in India, the Explanation defining permanent establishment to include a fixed place of business through which the business of the enterprise is wholly or partly carried on. If it applies to you, the first step is this: Work the no-PAN rate as the higher of twice the specified rate and five per cent, then apply the twenty per cent ceiling in the proviso.
Sub-section (1) provides that notwithstanding anything in any other provision of the Act, any person paying any sum or amount on which tax is collectible at source under Chapter XVII-BB (the collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (the collector), failing which tax shall be collected at the higher of (i) twice the rate specified in the relevant provision of the Act, or (ii) five per cent, with a proviso that the rate of tax collection at source under the section shall not exceed twenty per cent. Sub-section (2) makes a declaration under s.206C(1A) invalid unless the person furnishes his PAN in it; sub-section (3) requires collection under sub-section (1) where a declaration becomes invalid; sub-section (4) bars a certificate under s.206C(9) unless the application contains the applicant's PAN; sub-section (5) requires both collectee and collector to indicate the PAN in all correspondence, bills, vouchers and other documents sent to each other; sub-section (6) deems a PAN that is invalid or does not belong to the collectee to be no PAN; and sub-section (7) disapplies the section to a non-resident who does not have a permanent establishment in India, the Explanation providing that 'permanent establishment' includes a fixed place of business through which the business of the enterprise is wholly or partly carried on. The matter was decided on 2023-07-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Where the collectee does not furnish his PAN, tax is collected at the higher of twice the specified rate and five per cent, subject to a ceiling of twenty per cent. A s.206C(1A) declaration without the buyer's PAN is invalid and the full collection duty revives; an invalid PAN or one not belonging to the collectee is treated as no PAN; and the section does not apply to a non-resident without a permanent establishment in India.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the commencement of the proviso taken from the footnote printed on one of them. In the words reproduced by the source cited on this page: "Provided that the rate of tax collection at source under this section shall not exceed twenty per cent."
It was decided by the CBDT Circulars & Instructions on 2023-07-01 and is reported as Income-tax Act, 1961, s.206CC, with the proviso to sub-section (1) inserted with effect from 1 July 2023. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 206CC, section 206C, section 206C(1A), section 206C(9), section 206C(1G), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Where the collectee does not furnish his PAN, tax is collected at the higher of twice the specified rate and five per cent, subject to a ceiling of twenty per cent. A s.206C(1A) declaration without the buyer's PAN is invalid and the full collection duty revives; an invalid PAN or one not belonging to the collectee is treated as no PAN; and the section does not apply to a non-resident without a permanent establishment in India. It arises in TDS Defaults, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 206CC, section 206C, section 206C(1A), section 206C(9), section 206C(1G) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Refuse a Form 27C that does not carry the buyer's PAN — under sub-section (2) it is not a valid declaration and under sub-section (3) you must collect at the higher rate. Validate the PAN, do not just record it: sub-section (6) deems an invalid PAN, or one not belonging to the collectee, to be no PAN, and the shortfall demand lands on the collector. For a non-resident collectee, take evidence of the absence of a permanent establishment before relying on sub-section (7). Make sure any s.206C(9) application for a lower rate carries the applicant's PAN, or it cannot be granted.
Still good law. Read on three departmental pages stamped Year 2024 (No. 1), Year 2024 (No. 2) and Year 2025, all printing the section identically including the twenty per cent proviso. No Finance Act text was retrieved this pass and no page later than the Year 2025 one was located for this section. The Year 2022 page /w/section-206cc-4 lacks the proviso and states the position before 1 July 2023. Note separately that s.206CCA, the companion provision for a non-filer, was omitted with effect from 1 April 2025 — the library carries that point already and it must be checked before any higher rate is applied under that section. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The section was transcribed this pass from three departmental pages that print it identically — https://incometaxindia.gov.in/w/section-206cc-6 (Year: 2024 (No. 1)), /w/section-206cc-7 (Year: 2024 (No. 2)) and /w/section-206cc-8 (Year: 2025) — all headed 'Income-tax Act, 1961' and 'Requirement to furnish Permanent Account number by collectee'. An earlier page, /w/section-206cc-4 (Year: 2022), prints the same section WITHOUT the twenty per cent proviso and must not be used to state the current position. The dating of the proviso rests on the footnote apparatus, re-read this pass on the Year 2025 page /w/section-206cc-8, where footnote 46 reads in full: "Ins. by Act No. 08 of 2023, w.e.f. 1-7-2023." That is an Act NUMBER, in the same style as every other departmental footnote read on this build. An earlier reading of the -6 page rendered the same footnote as "Inserted by the Finance Act, 2023, w.e.f. 1-7-2023"; that naming was NOT reproduced on re-reading and must not be relied on — the correspondence of Act No. 08 of 2023 to the Finance Act 2023 was not verified from any source read on this build, and this entry reproduces the number only. The commencement date 1-7-2023 is common to both readings. The absence of the proviso from the Year 2022 page /w/section-206cc-4 was re-confirmed this pass by asking that page to transcribe, without prompting, everything printed between clause (ii) and sub-section (2): it prints clause (ii) ending "at the rate of five per cent." and then sub-section (2), with nothing between. The point about an inoperative PAN feeding into sub-section (6) is a practical observation about how the sub-section operates, not a proposition taken from any circular or decision read this pass — the Aadhaar-linking rules and the CBDT relief circulars on inoperative PANs were not retrieved on this slice. The date in 'decided_on' is the date from which the position stated takes effect, not a decision date. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Where the collectee does not furnish his PAN, tax is collected at the higher of twice the specified rate and five per cent, subject to a ceiling of twenty per cent. A s.206C(1A) declaration without the buyer's PAN is invalid and the full collection duty revives; an invalid PAN or one not belonging to the collectee is treated as no PAN; and the section does not apply to a non-resident without a permanent establishment in India.
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