What TDS rate applies on salary if the employee has no PAN?

Question

tdsguru.in (CA firm) · Accepted Answer

TDS is deducted at the higher of 20% or the average rate of tax — and the employee cannot get credit without a valid, operative PAN. If a salaried employee does not furnish a valid PAN, Section 397(2) (earlier 206AA) requires TDS at the higher of 20% or the employee's average rate of income-tax, and no Form 16 credit can flow until the PAN is corrected. An inoperative PAN (e.g., not linked with Aadhaar) is treated the same way. Employers should ensure every employee's PAN is valid and operative before running payroll TDS.