How to Enable Tax on No PAN & Inoperative PAN for an Employee?
To ensure compliance with Section 206AA of the Income Tax Act, our HRMS now supports automated higher TDS deduction in cases where an employee has not provided a valid PAN (Permanent Account Number). This feature helps organizations avoid non-compliance and ensures that TDS is deducted accurately according to statutory guidelines.
As an Admin, you now have control over enabling or disabling this rule at an individual employee level, depending on your organization’s internal policies and documentation.
What is Section 206AA?
Section 206AA mandates that if a person (in this case, an employee) does not furnish their PAN or provides an invalid one, then the TDS must be deducted at a higher rate. The applicable rate in such scenarios is:
- 20%, or
The normal slab rate as per the employee's income,
whichever is higher.
How to Enable or Disable This Setting for an Employee?
Admins can control this functionality at the employee level by updating a new setting in the statutory section of the employee profile.
Steps to configure:
- Login as Admin
- Go to Employee Directory and open the desired employee’s profile
- Navigate to the Statutory tab
Locate the setting: "Tax on No PAN & Inoperative PAN"
Select:
- Yes: System will apply higher TDS rate if PAN is invalid/missing
- No: System will not apply the higher rate even if PAN is invalid/missing
- Click Save
⚠️ Important: This setting must be reviewed carefully. It is your responsibility as an Admin to ensure that employees with missing or invalid PANs are either corrected or flagged appropriately using this toggle.
Best Practices for Admins
- Regularly audit PAN details to ensure accuracy
- Encourage employees to update their PAN if it’s missing or incorrect
- Always keep documentation ready for employees whose TDS was deducted at a higher rate
If you need any assistance with setting this up or have questions regarding TDS calculation, feel free to reach out to our support team.