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Budget: Know more on quoting PAN and TAN - Part IV

Written by: Staff


The existing section 139A (5B) provides that where any tax has been deducted, every person deducting the tax shall quote the PAN of the person to whom the amount has been paid in annual return of TDS furnished U/s 206. Sub section (5D) provides for a similar quoting of PAN of every buyer in respect of tax collected U/s 206C in the annual return of TCS. With the proposed doing away of the annual returns of TDS and TCS, clause 32 of the Finance Bill 2006 proposes to amend the said sub sections 5B&5D to provide for compulsory quoting of PAN and TAN in all quarterly statements prepared and delivered in accordance with the provisions of section 200(3) or the provisions of section 206C(3).

While the amendments relating to dispensing with the annual returns of TDS and TCS are proposed to be effected from April 1, 2006, the amendments in sections 139A&272A shall be effected from June 1, 2006.


The existing provisions

Section 203 provides for issue of certificate by the deductor to the person in respect of whose income such payment of tax has been made. Specify the amount so paid, the rate at which the tax has been paid and such other particulars as may be prescribed. Sub section 3 provides that where tax has been deducted on or after April 1, 2006, there shall be no requirement to furnish such certificate. This provision intended to create a paperless regime by de-materialising the TDS&TCS certificate.

These provisions were to come in-force from April 1, 2005 but Finance Act 2005 deferred the enforcement by one year and provisions were to come in force in respect of TDS and TCS collected or paid on or after April 1, 2006.

As a consequence of this amendment sub-section (3) was inserted in section 199, to provide that where any deduction is made in accordance with the provisions of this chapter on or after April 1, 2006 and paid to the Central Government, the amount of tax deducted and specified in the statement referred to in section 203AA shall be treated as tax paid on behalf of the persons referred to in sub-section(1). As the case in sub-section (2) credit shall be given to him for the amount so deducted in the assessment made under this Act for the assessment year for which, such income is assessable without the production of certificate.

Consequently section 139(9) was amended to provide that the return of income shall not be deemed to be defective if it was not accompanied by proof of tax deducted.


It is proposed to defer the commencement of de-materialisation provisions by two years to make such provisions applicable for tax deducted or paid U/s 203(3) or collected U/s 206C on or after April 1, 2008. Clause 41, 43, 45&47 have proposed amendment in sections 199(3), 203(3), 203AA&206C respectively, and clause 31 proposes an amendment to section 139, to give effect to this deferment.


The provisions of de-materialisation were introduced with great enthusiasm in 2005. The avowed objective of such amendment was to make the life of the taxpayer easy by introducing certificates in DEMAT format, so that the credit for taxes could be given not on the basis of documentary evidence procured by the assessee, but on the basis of an electronic entry in the data base which could be easily verified by the click of a button.

The On Line Tax Accounting system (OLTAS) was supposed to handle this mundane task with the help of PAN and TAN. However, it seems the Department has not been able to overcome the love for paper work, and is not yet able to create a reliable and robust data base.

The shift to de-materialized system shall not be possible unless a system to verify the data including PAN and TAN is in place. The financial Minister confesses that in many places quoting of falls TAN or PAN have resulted in getting the taxes deducted or collected or paid getting credited to the suspense account. Unless all transactions are matched in the OLTAS, and complete information is populated in the deductees' or collectees' accounts de-materialisation shall remain a far cry.

Related Stories

Part I - A Budget to maintain growing economy

Part II - Budget: More on self-assessment and interest

Part III - Budget: Amendments pertaining to TDS and TCS

Part V - Proposing S.115BBB and the Budget

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