new delhi get ready to shell out more tax up front on any income received if you are unable to provide your permanent account number from april 1 the tax deducted at source or tds on payments could be as high as 20 for those not quoting pan against the regular rate of 210 the budget 200910 had made it mandatory for residents and nonresidents to quote this number or face a higher rate of withholding tax it comes into effect from thursday april 1 the idea behind the rule is to encourage more people to obtain pan a 10digit alphanumeric tax payer identification number and thereby become visible to tax authorities the tax base of the country is a mere 33 crore because of massive underreporting of incomes and largescale exemptions quoting of pan will allow income tax authorities to establish an audit trail and catch tax evaders some experts feel the measure is excessive this would put unnecessary burden on senior citizens who do not have a tax liability said kishan malhotra executive director kpmg senior citizens could just file form 15h in absence of tax liability and become eligible for exemption from tds if they do not furnish a pan they will have to face a tds rate of 20other indian residents not falling within the tax bracket will also have to obtain a pan and quote it where required tax deducted at source can be adjusted against a taxpayers actual tax liability but in the case where there is no tax liability it has to be claimed back by filing returnsthe new rule comes with a severe penalty if not followed any failure to deduct taxes at appropriate rates will result in disallowance of expenditure for the one making payment recovery of tax from him and levy of interest and penalty interestingly the total number of pan issued in the country is in excess of 8 crore income tax department issues the permanent account number in partnership with utitsl and nsdlwith this provision coming into effect even nonresidents having just oneoff transaction with indian parties will have to obtain pan failing which they will suffer a much higher withholding tax on their income typically payments by residents to nonresidents in the nature of royalties or fees for technical services attract withholding tax at rate of 1056 under the income tax act or at 10 under certain tax treaties in the absence of a permanent establishment or a fixed place of work in india similarly interest payments to nonresidents attract withholding tax at a rate lower than 20 under certain tax treaties the pan is required to be quoted in document pertaining relating to sale of property sale or purchase of a motor vehicle requiring registration other than twowheelers most of the banking transactions require pan to be quoted