The Central Board of Direct Taxes (CBDT) on Wednesday, Jan 20 released a statement shedding light on this new policy.
Under this new rule, financial transactions without reference of PAN will attract higher rate of Income Tax at the point of Tax Deduction at Source (TDS).
This means that all transactions where the deductee"s PAN is not available will be charged at a higher of the prescribed rate or 20 per cent.
"The law will also apply to all non-residents in respect of payments/remittances liable to TDS," CBDT statement said, urging all deductees, including non-residents, to obtain their PAN by Mar 31, 2010.
"As per the new provisions, certificate for deduction at lower rate or no deduction shall not be given by the assessing officer under Sec. 197, or declaration by deductee under Sec. 197A for non-deduction of TDS on payments shall not be valid, unless the application bears PAN of the applicant/deductee," CBDT added.
The department advised all deductees to not only procure PAN but also to communicate the same to the deductors before tax is actually deducted on transactions after that date.
Experts believe that this new move is aimed at bringing more people in the tax ambit and in turn control black money.