The Statutory Brief

IT Act 1961 → 2025 / Section 206AA

TDS

Section 206AA → Section 397(2)

Higher TDS/TCS where PAN is not furnished

Section 206AA of the old Income-tax Act, 1961 · new section 397(2) under the Income-tax Act, 2025

New reference Section 397(2) (206CC also 397(2))

Income-tax Act, 1961Section 206AA

  • TDS at higher of section rate, rates in force, or 20% (5% for 194O/194Q)
  • TCS at higher of twice the rate or 5% (206CC)
  • Section 206AB (non-filers) omitted from 1 April 2025

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 397(2) (206CC also 397(2))

  • Section 397(2)(b)(i): TDS at highest of section rate, rates in force, or 20% (5% for purchase of goods and e-commerce)
  • 397(2)(b)(ii): TCS at higher of twice the rate or 5%, capped at 20%
  • Exceptions for certain non-residents

Applies from tax year 2026-27 (from 1 April 2026).

What changed

Renumbered; rates unchanged.

Practice notes

  • An inoperative PAN (not linked to Aadhaar) is treated as not furnished.

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

What is the TDS rate without PAN under the new Income Tax Act 2025?

Section 397(2): the higher of the normal rate, rates in force or 20% (5% for purchase of goods and e-commerce).

What is section 206AA called in the new Income-tax Act, 2025?

Section 206AA of the Income-tax Act, 1961 corresponds to Section 397(2) (206CC also 397(2)) of the Income-tax Act, 2025, which applies from 1 April 2026 (tax year 2026-27).

What changed in section 206AA under the new Income Tax Act?

Renumbered; rates unchanged.

Is section 206AA still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 206AA of the 1961 Act. Section 397(2) (206CC also 397(2)) of the 2025 Act applies from tax year 2026-27.

Related sections

139A→262Permanent Account Number (PAN): who must apply and where it must be quoted194Q→393TDS by buyers on purchase of goods above ₹50 lakh206C→394Tax collected at source (TCS) on specified sales, LRS remittances, overseas tour packages, motor vehicles and parking/toll/mine leases