Circular No. 402/92/2006-MC (04 OF 2010)

Of 2010 press release no. 402/92/2006 mc 04 of 2010 dated 20 1 2010 1

What this is

Circular No. 402/92/2006-MC (04 OF 2010) was issued by the Central Board of Direct Taxes on 20 January 2010. Its subject is Of 2010 press release no. 402/92/2006 mc 04 of 2010 dated 20 1 2010 1.

What it does

Publicises the new provision taking effect from 1 April 2010 under which tax is to be deducted at the higher of the prescribed rate or 20 per cent on every transaction liable to deduction where the deductee's permanent account number is not available, including payments and remittances to non-residents. A certificate for deduction at a lower rate or for no deduction cannot be given by the Assessing Officer under section 197, and a declaration by the deductee under section 197A will not be valid, unless the application or declaration bears the applicant's permanent account number. The law requires both deductor and deductee to quote the deductee's number in all correspondence, bills, vouchers and other documents passing between them. Deductors are advised to ask their deductees to obtain and furnish the number, and deductees, including non-residents with transactions liable to deduction in India, are advised to obtain one by 31 March 2010 and communicate it before tax is deducted on any transaction after that date. It also notes Notification No. 94/2009 on perquisites and Circular No. 1/2010 for the guidance of deductors from salary.

Why it was issued

The release is issued to give notice of the new provision before it took effect and to prevent disputes about the quoting or accuracy of a permanent account number.

Who it reaches

Deductors making payments to persons without a permanent account number
Non-residents receiving payments or remittances liable to deduction
Applicants for a certificate under section 197 or filing a declaration under section 197A
Deductees applying for a permanent account number before 31 March 2010

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.197	s.395, s.400
s.197A	s.393, s.400, s.402

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

PRESS RELEASE
INCOME-TAX ACT
Transactions which are liable to TDS at the higher rate under new TDS provision applicable with effect from 1-4-2010
PRESS RELEASE NO. 402/92/2006-MC (04 OF 2010), DATED 20-1-2010
A new provision relating to tax deduction at source (TDS) under the Income-tax Act, 1961 will become applicable with effect from 1st April, 2010. Tax at higher of the prescribed rate or 20 per cent will be deducted on all transactions liable to TDS, where the Permanent Account Number (PAN) of the deductee is not available. The law will also apply to all non-residents in respect of payments/remittances liable to TDS. As per the new provisions, certificate for deduction at lower rate or no deduction shall not be given by the Assessing Officer under section 197, or declaration by deductee under section 197A for non-deduction of TDS on payments shall not be valid, unless the application bears PAN of the applicant/deductee.
2. All deductors are liable to deduct tax at the higher rate in all transactions not having PAN of the deductees on or after 1st April, 2010. In order that there is no dispute regarding quoting/non-quoting of PAN or accuracy thereof, the law requires all deductees and deductors to quote PAN of deductees in all correspondences, bills, vouchers and other documents sent to each other. All deductors are, therefore, advised to intimate their deductees to obtain and furnish their PAN so as to avoid TDS at a higher rate. All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by 31st March, 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date.
3. The procedure for obtaining PAN is simple, inexpensive and quick. Application for PAN can be filed in Form 49A to National Securities Depository Ltd. (NSDL) or Unit Trust of India Investor Services Ltd. (UTIISL) or their intermediaries. Non-residents can apply through the local embassy/consulate of India. Applications can also be filed, paid for or tracked online through the Internet on the following websites :—
http://incometaxindia.gov.in/
https://incometaxindiaefiling.gov.in/portal/index.jsp
http://www.tin-nsdl.com/
http://www.utitsl.co.in/
4. The Central Board of Direct Taxes (CBDT) has issued Notification No. 94/2009 relating to taxation of perquisites/profits in lieu of salary and Circular No. 1/2010 for the guidance of tax deductors for salaries. These documents are available on the department’s website at http://incometaxindia.gov.in/
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What to watch

This is a press release publicising a provision, not a circular; the obligation and the rate come from the Act, not from this release.
The higher of the prescribed rate or 20 per cent applies, so where the prescribed rate already exceeds 20 per cent it is that rate that governs.
A declaration under section 197A without a permanent account number is invalid, so a payee who files one without the number gets no protection at all.
The reach to non-residents is the point most often missed, since it makes a foreign payee obtain an Indian permanent account number to avoid the higher rate.

Where you meet it

In a short-deduction demand where the payee's permanent account number was missing from the statement, or on a rejected section 197 certificate application.

What it names

It mentions. Circular No. 1/2010

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 02 /2023 — Procedure format and standards for filling an application for grant of certificate under sub rule 4 and its proviso of r 27 September 2023
Circular No. 7/2008 — Order under section 119(1) of the Income-tax Act, 1961 regarding exemption from the TDS provisions under section 197 rea 1 August 2008
Notification No. 237 — Amendment of the Income-tax Rules under section 197 of the Income-tax Act, 1961 2 September 2004
Circular No. 780 — 149. Computation of income falling under section 10(23G) 4 October 1999
Circular No. 774 — 1174. Whether certificate issued under section 197(1) will be applicable only in respect of credit or payments, as the c 17 March 1999
Circular No. 716 — Section 194A l Interest Other Than "Interest on Securities" 9 August 1995

← Press Release · Circular No. 1/2010 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.