Home / Money / Personal Finance /  Lower TDS, TCS rates won’t apply if you don’t furnish PAN or Aadhaar

In order to enhance liquidity in the hands of taxpayers, finance minister Nirmala Sitharaman on Wednesday announced reduction in the rate of tax deducted at source (TDS) and tax collection at source (TCS) by 25%. TDS and TCS is the process through which tax is charged and collected at the source of income to ensure regular flow of revenue to the government and check tax evasion.

However, there are some categories of taxpayers who will not benefit from this announcement.

One, TDS rates differ based on whether or not the recipient of the income has furnished the Permanent Account Number (PAN) or Aadhaar to the deductor. In the absence of a valid PAN or Aadhaar, TDS can be charged at the rate of 20% or higher. After the FM’s announcement, the Central Board of Direct Taxes (CBDT) clarified in a press release that “no reduction in rate of TDS or TCS, where the tax is required to be collected at higher rate due to non-furnishing of PAN or Aadhaar." So if you have not provided PAN or Aadhaar to the deductor, lower rates will not be applicable to you.

Two, though TDS is charged on salary income, as per the applicable income tax slab rate, the relief in the form of lower TDS has not been extended to salaried individuals. This means your salary will continue to attract TDS at the same rate as earlier.

Three, the benefit of lower TDS and TCS rate can only be availed by resident individuals and is not available to non-resident Indian (NRI) taxpayers.

The new lower rates of TDS and TCS will be effective from 14 May 2020 to 31 March 2021. The rate of TDS ranges between 1% and 30% depending on the source of income, while the rate of TCS ranges between 0.10% and 5%.

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