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. In force. The section has been read in three texts, all printing it identically and all including the twenty per cent proviso. No Finance Act text has been read, and no text of this section later than those has been located. The 2022 text of the section lacks the proviso and states the position before 1 July 2023. For a collection before that date there is no ceiling in this section, which is the single most important thing to fix before quoting a rate: the higher rate under s.206CC is otherwise the higher of twice the rate specified in the relevant provision and five per cent, and without the proviso it can exceed twenty per cent. 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 — a demand that stacks s.206CC and s.206CCA for a period after that date is applying a provision that has gone. No judicial decision on s.206CC has been found, and none is cited on this page. What would displace the entry: an amendment to the proviso, which is recent enough that a further change would not be surprising; or a decision on how the twenty per cent ceiling interacts with the higher rates prescribed elsewhere for a collectee without a PAN. 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 has been taken from three texts that print it identically, all headed 'Requirement to furnish Permanent Account number by collectee' in the Income-tax Act, 1961. A WARNING ABOUT OLDER REPRODUCTIONS. The 2022 text of the section prints it WITHOUT the twenty per cent proviso and must not be used to state the current position. Its absence has been confirmed directly: that text prints clause (ii) ending 'at the rate of five per cent.' and then sub-section (2), with nothing between. The dating of the proviso rests on the section's own footnote, which 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 the other amendment footnotes carried on these sections. An earlier reading of one text 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 has not been verified from anything read here, and this entry reproduces the number only. The commencement date of 1 July 2023 is common to both readings and is not in doubt. One observation in this entry is not taken from any source and is labelled as such. The point about an inoperative PAN feeding into sub-section (6) is a practical observation about how the sub-section operates; it is not a proposition taken from any circular or decision read for this entry. The Aadhaar-linking rules and the Board's relief circulars on inoperative PANs have not been obtained here, and the library carries them separately. The date in 'decided_on' is the date from which the position stated takes effect, and not a decision date. One point of structure worth setting out, because the section is short and its arithmetic is easy to get wrong. Sub-section (1) fixes the higher rate as the higher of twice the rate specified in the relevant provision and five per cent, and the proviso then caps the result at twenty per cent. So for a collection whose ordinary rate is one per cent the higher rate is five per cent and the cap never bites; it bites only where twice the specified rate would exceed twenty per cent. A computation that applies twenty per cent as though it were the standard no-PAN rate is applying the ceiling as a floor. 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.
TaxSphere, “Statutory position — s.206CC: the higher TCS rate where the collectee gives no PAN, and the twenty per cent cap”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-206cc-no-pan-higher-tcs-rate-capped-at-twenty-per-cent/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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My bank has collected TCS on the money I sent abroad for my daughter's university fees, and my travel agent has collected on the tour package. What does s.206C(1G) actually require, and at what rate and threshold?
I sold scrap without collecting TCS and only got the buyers' Form 27C declarations years later. Has the officer any answer to that, and what about buyers who have already paid tax?
I produced the buyers' Form 27C during the assessment, and later a Form 27BA from an accountant. The officer says both are too late. Is he right?
I collected the Form 27C declarations late and filed them late with the TDS officer. Can the department still raise a TCS demand on me?
