The employee may have to pay more than 20 percent of the income as tax to the government.

If the employee does not provide PAN or Aadhaar information to his employer, then such employee may have to pay more than 20 percent of the income to the government. The Central Board of Direct Taxes (CBDT) has recently issued a circular stating that if an employee does not inform the employer of his PAN or Aadhaar for deduction of tax deduction at source (TDS) on salary Is, what will happen in that situation. The CBDT has stated in the circular that within section 206AA of the Income Tax Act, it is mandatory to give PAN or Aadhaar information to the employees to get the amount on which the tax is deductible.

The circular states that under section 206AA present in the Act, it is mandatory for an employee to provide PAN or Aadhaar number in a situation where the tax on his income is deductible.

Tax calculation in case of not giving information

According to the circular, it is the responsibility of taxpayers to inform their tax deductors the correct PAN or Aadhaar number. TDS under 206AA will be deducted at higher rates if employees do not do so.

The CBDT further stated that if an employee does not inform the employer of his PAN or Aadhaar number, it is the responsibility of the employer to take the TDS at increased rates which are as follows:

  1. at the rate mentioned in the appropriate provision of the Act,
  2. the rates applicable,
  3. at the rate of 20 per cent.

In these three cases, the employer will decide the amount of tax and will apply more rates of TDS.

CBDT further states that where the employee’s income for TDS is less than the taxable limit after calculation under section 192, no tax will be deducted. But where the employee’s income is more than the taxable limit, the deductor will calculate the average rate of income tax based on the rates applicable under section 192.

If the calculated tax is less than 20 percent, then the tax deduction will be at the rate of 20 percent and if the average rate is more than 20 percent, then the tax will be deducted at the average rate.

No health or education cess

According to the CBDT, if tax is deducted at the rate of 20 per cent under section 206AA of the Act, then health and education cess at the rate of 4 per cent will not be deducted.

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