Income tax law and TCS compliance

Section 206CC of the Income-tax Act, 1961: PAN Requirement for Collectee

Section 206CC required a person making a payment subject to tax collection at source (TCS) to provide a valid Permanent Account Number (PAN) to the collector. Failure to do so generally triggered collection at a higher statutory rate.

Current legal position (October 2026): The Income-tax Act, 2025 came into force on 1 April 2026. Section 206CC remains relevant to transactions and proceedings governed by the earlier law; the corresponding PAN and TCS compliance requirements are consolidated in Section 397 of the Income-tax Act, 2025. Check the law applicable to the transaction date.

Meaning and scope of Section 206CC

A collectee is the person paying an amount on which TCS is required under Chapter XVII-BB; a collector is the person responsible for collecting and depositing that tax. PAN is the Permanent Account Number allotted under the income-tax law. Section 206CC was inserted by the Finance Act, 2017 with effect from 1 April 2017.

Higher rate when PAN is not furnished

Under Section 206CC(1), the applicable TCS rate was the higher of twice the rate prescribed for the transaction or 5%, subject to a statutory ceiling of 20%. Specific transaction provisions could modify this general calculation; the correct rate depends on the relevant financial year and transaction.

Situation	General consequence under Section 206CC
Valid PAN furnished	Ordinary TCS rate under the relevant provision, if TCS applies.
PAN not furnished or invalid	Higher of twice the applicable TCS rate or 5%, generally capped at 20%.
Non-resident without a permanent establishment in India	Section 206CC(7) excluded such a person.

For example, where the ordinary TCS rate was 1%, the general no-PAN rate would be 5%; where the ordinary rate was 10%, it would be 20%. These are illustrations only, not a determination that TCS applies to a particular payment.

Explanation of the individual subsections

Subsection (1): PAN and higher-rate collection

The collectee had to furnish PAN to the collector. Failure attracted the higher-rate formula described above, subject to the applicable ceiling and any transaction-specific exception.

Subsections (2) and (3): Declarations

A declaration under Section 206C(1A) was not valid without the declarant's PAN. If invalid, the collector had to collect tax under Section 206CC(1). Such declarations were relevant, among other cases, to eligible purchases for manufacturing, processing or producing articles or things, or generation of power, rather than trading.

Subsection (4): Lower-collection certificates

An application for a certificate under Section 206C(9) required the applicant's PAN. Without it, the certificate could not be granted.

Subsection (5): PAN in documents

The collectee was required to give PAN to the collector, and both were required to mention it in correspondence, bills, vouchers and other documents exchanged between them.

Subsection (6): Invalid or incorrect PAN

If the PAN supplied was invalid or did not belong to the collectee, it was treated as though no PAN had been furnished. The higher-rate rule therefore applied.

Subsection (7): Non-resident exception

The section did not apply to a non-resident without a permanent establishment in India. A permanent establishment included a fixed place of business through which the enterprise's business was wholly or partly carried on.

Corresponding provision under the Income-tax Act, 2025

Section 397 consolidates compliance and reporting obligations relating to tax deduction and collection. In particular, Section 397(2) addresses the consequences of failure to furnish a valid PAN, including the higher TCS rate, a 20% ceiling, exceptions for certain non-residents and the validity of relevant declarations and certificate applications. The new provision should be consulted directly for transactions governed by the 2025 Act.

Also note that Section 206CCA, which formerly imposed higher TCS rates on certain non-filers of income-tax returns, was omitted with effect from 1 April 2025. Separately, TCS on general sale of goods under Section 206C(1H) ceased to apply from 1 April 2025.

Frequently asked questions

Is PAN compulsory for a TCS transaction?

Where the applicable TCS law requires it, the collectee must furnish a valid PAN or meet a legally permitted alternative. Failure may lead to a higher TCS rate.

What is the maximum higher TCS rate under old Section 206CC?

The statutory ceiling under Section 206CC was 20%, subject to the transaction-specific law and the relevant period.

Does Section 206CC apply after 1 April 2026?

The 1961 Act provision continues to matter for earlier periods and saved proceedings. For transactions under the Income-tax Act, 2025, consult Section 397.

Official legislation and guidance

Information is general in nature. Rates, exclusions and procedural requirements must be checked against the legislation and notifications applicable to the transaction.