Section 206AA: Higher Tax Deduction for Non-PAN Holders with Exceptions for Non-Residents Under Rule 37BC
Section 206AA of the Income Tax Act mandates that any person receiving income subject to tax deduction at source must provide their Permanent Account Number (PAN) to the deductor. Failure to do so results in tax being deducted at the higher of specified rates, with exceptions for certain non-residents and foreign companies. Rule 37BC provides relief for non-residents by exempting them from higher tax rates if they provide specific documentation. The section does not apply to payments below the tax deduction threshold or in cases where PAN is not required. Recent clarifications address non-applicability of higher rates in certain circumstances, such as the death of the deductee before PAN-Aadhaar linkage.