What will happen to an employee's income tax deduction if PAN is not updated?

A PAN (Permanent Account Number) is a unique ten-character alphanumeric code issued by the Indian Income Tax Department.  

If an employee, under the new tax regime, fails to provide their PAN details, then the provisions of Section 206AA come into effect. The employee  faces the consequence of a higher TDS rate, which may result in higher tax deductions from their income.

In such cases, tax shall be deducted at a higher rate, which is the highest of the following:

(a) Rate Specified in the Income Tax Act:

• The TDS rate specified in the relevant provision of the Income-tax Act will apply.

(b) Rate(s) in Force:

• If there's no specific rate mentioned in the Income Tax Act for the particular income, then the rate(s) in force at the time will apply. This includes the standard TDS rates prescribed by the government.

(c) 20%:

• If neither the specific rate nor the general rate(s) in force are available, then the TDS will be deducted at a flat rate of 20%.

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FAQs - To read more FAQs about PAN, click here.

Documentation - To learn more about the PAN page, click here.

Product Update - To read about the product update, click here.