No TDS at 20% under sec. 206AA if PAN is not furnished and income is below taxable limit

No TDS at 20% under sec. 206AA if PAN is not furnished and income is below taxable limit

Karnataka High Court reads down section 206AA to make it inapplicable to persons whose income is below taxable limit. As per Sec. 206AA every person who wishes to have a transaction in bank/FIs including small investors/depositors (i.e. investors/depositors with income below taxable limit) has to furnish its PAN. This is in contradistinction to section 139A according to which such persons need not have a PAN, if his total income is below taxable limit. The HC in this regard lays down as follows: 

a) Sec. 206AA hinders and discourages such small investors from coming forward to invest their money for secured reasons and their secured future which is not desirable for country's economy;

b) Sec. 206AA is unreasonable as it invalidates Form 15G which does not mention PAN;

c) Sec. 206AA which overrides section 139A is discriminatory against small investors; and

d) Sec. 139A has withstood scrutiny of Article 14 of the Constitution for reasonableness.

Considering above the High Court made section 206AA inapplicable to persons having incomes below taxable limits. It is further held that Banks and FIs not to insist on PAN for opening of accounts of below taxable limit income-earners - SMT. A. KOWSALYA BAI v. UNION OF INDIA [2012] 22 TAXMANN.COM 157 (KARNATAKA)