Under section 397(2) of the Income-tax Act, 2025, a payee fails to furnish a PAN. The rate specified for the payment is 10%, the rate in force is 10%, and no exception applies. At what rate must tax…
Question and options
Under section 397(2) of the Income-tax Act, 2025, a payee fails to furnish a PAN. The rate specified for the payment is 10%, the rate in force is 10%, and no exception applies. At what rate must tax be deducted?
15%
10%
5%
20%
Answer and explanation
Correct answer: D - 20%
Section 397(2)(b)(i) of the Income-tax Act, 2025 requires tax to be deducted at the higher of the rate specified in the Act, the rate in force, and 20% (5% for certain specified payments), so here it is 20%. Deducting at the normal 10% ignores the PAN default, and twice the rate applies only to tax collected at source, not to deduction.
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