India Tax: Central Board of Direct Taxes Announcement

The Central Board of Direct Taxes has issued a press release advising taxpayers making payments subject to tax deduction at source (TDS) to nonresidents to request that the recipients provide their Permanent Account Number (PAN) to avoid the withholding of tax at a higher rate. The 2009 Finance Act No 2 introduced a new provision relating to TDS under the Indian Income Tax Act, 1961, which will be applicable as from 1 April 2010.

Under the new rule, tax at the prescribed rate or 20%, whichever is higher, will be deducted on all transactions liable to TDS, including payments/remittances to nonresidents where the PAN of the recipient is not furnished. The new rule also states that the Indian assessing officer will not issue a certificate for a reduced or no deduction of TDS unless the application bears the PAN.