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of <h1>Income Tax Act Section 206AA requires PAN for TDS deductions or face twenty percent penalty rate</h1> Section 206AA of the Income Tax Act, 1961 mandates that any person receiving income subject to tax deduction at source must furnish their Permanent Account Number to the deductor. Failure to provide PAN results in tax deduction at the higher of the applicable rate, rates in force, or twenty percent. Special provisions reduce this penalty rate to five percent for deductions under sections 194-O and 194Q. The section invalidates declarations under section 197A without PAN and prohibits certificates under section 197 without PAN in applications. Both parties must indicate PAN in all correspondence and documents. Invalid or incorrect PAN is treated as non-furnishing, triggering penalty rates. Non-residents and foreign companies are exempted for specific payments including interest on long-term bonds under section 194LC and other prescribed payments subject to conditions.
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