CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · BB.—COLLECTION AT SOURCE (TCS)
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · BB.—COLLECTION AT SOURCE (TCS)
Section 206CC — Requirement to Furnish PAN by Collectee (Higher Rate for No PAN)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. The TCS analogue of section 206AA; inserted by the Finance Act 2017 with effect from 1 April 2017, with a 20% rate-cap proviso from 1 July 2023.
Finance Act, 2026: No amendment. The Finance Act 2026 makes no change to section 206CC.
Mechanism: A collectee must furnish his PAN to the collector; failing which TCS is collected at the higher of twice the specified rate or five per cent (capped at 20%). A non-resident without a permanent establishment in India is exempt (sub-section (7)).
Litigation profile: Candour rule. No direct case law; construction is governed by analogy to the settled section 206AA jurisprudence — a PAN-default provision cannot override a beneficial DTAA rate.
A. SECTION COMMENTARY
Section 206CC is the TCS analogue of section 206AA: it requires the collectee to furnish his Permanent Account Number to the collector, failing which tax is collected at the higher of twice the specified rate or five per cent (capped at twenty per cent by the proviso inserted with effect from 1 July 2023). It also invalidates a section 206C(1A) self-use declaration that omits the PAN, bars the lower-rate certificate under section 206C(9) unless the application carries the PAN, deems an invalid or mismatched PAN to be no PAN, and — by sub-section (7) — exempts a non-resident without a permanent establishment in India.
The PAN-penalty and its outer limit
Section 206CC is a coercive PAN-compliance measure: its purpose is to make the collectee's PAN available so that the credit for TCS (a deemed payment of his tax under section 206C(4)) can be matched to him. The proviso capping the rate at twenty per cent (from 1 July 2023) confirms that the higher rate is a compliance lever, not a charge. The non-resident-without-PE carve-out in sub-section (7), and the deeming of an invalid PAN to be no PAN in sub-section (6), define the boundaries of the lever.
Section 206CC is judicially untested, but the identical question on its TDS twin, section 206AA, is settled: a procedural PAN-default provision cannot override the beneficial rate guaranteed by a Double Taxation Avoidance Agreement read with section 90(2). The Delhi High Court in Danisco India held that section 206AA does not override section 90(2); Rule 37BC relaxes the PAN requirement for non-residents who furnish prescribed alternative documents. By the same reasoning — reinforced by the express non-resident-without-PE exemption in section 206CC(7) — section 206CC should not be read to defeat a treaty rate. The analogy is offered as cognate, not direct, authority.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Amendment foot-note markers have been resolved into the current operative text; the editorial marker “***” denotes text omitted by the Legislature.
Requirement to furnish Permanent Account number by collectee.
206CC. (1) Notwithstanding anything contained in any other provisions of this Act, any person paying any sum or amount, on which tax is collectible at source under Chapter XVII-BB (herein referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall be collected at the higher of the following rates, namely:— (i) at twice the rate specified in the relevant provision of this Act; or (ii) at the rate of five per cent:
Provided that the rate of tax collection at source under this section shall not exceed twenty per cent.
(2) No declaration under sub-section (1A) of section 206C shall be valid unless the person furnishes his Permanent Account Number in such declaration.
(3) In case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at source in accordance with the provisions of sub-section (1).
(4) No certificate under sub-section (9) of section 206C shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.
(5) The collectee shall furnish his Permanent Account Number to the collector and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.
(6) Where the Permanent Account Number provided to the collector is invalid or does not belong to the collectee, it shall be deemed that the collectee has not furnished his Permanent Account Number to the collector and the provisions of sub-section (1) shall apply accordingly.
(7) The provisions of this section shall not apply to a non-resident who does not have permanent establishment in India.
Explanation.—For the purposes of this sub-section, the expression "permanent establishment" includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.
C. AUTHORITIES
Section 206CC has no direct case law; the candour rule is observed. Its construction is governed, by close analogy, by the settled jurisprudence on its TDS twin, section 206AA — in particular that a PAN-default provision cannot override a beneficial DTAA rate.
Cluster 1 — The section 206AA analogy (PAN-default versus treaty rate)
No reported decision construes section 206CC directly. The decision below construes section 206AA, the materially identical TDS provision, and applies to section 206CC by parity of reasoning; section 206CC(7) independently exempts a non-resident without a permanent establishment.
Danisco India (P) Ltd. v. Union of India (2018) 404 ITR 539 (Del)
Issue: Whether section 206AA — requiring a higher (20%) rate for want of PAN — can override the beneficial rate available under a DTAA read with section 90(2).
Held: No. Section 206AA is a procedural collection provision, not a charging section; it cannot override the beneficial treaty rate under section 90(2). Where tax is withheld at the treaty rate, the Assessing Officer cannot insist on 20% merely for want of PAN. Rule 37BC relaxes the PAN requirement for non-residents furnishing prescribed documents.
Significance: The governing authority by analogy for section 206CC: a PAN-default provision in Chapter XVII cannot defeat a DTAA rate; section 206CC(7)'s non-resident-without-PE exemption points the same way.
Cognate note — Rule 37BC and the wider section 206AA line
Position: The proposition that section 206AA yields to the DTAA where the non-resident furnishes alternative documentation (name, address, country, TRC) has been widely applied; Rule 37BC is its regulatory expression. These authorities construe section 206AA, not section 206CC, and are cited as cognate support pending any direct ruling on section 206CC.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow, spent or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · BB.—COLLECTION AT SOURCE (TCS)
Section 206CC — Requirement to Furnish PAN by Collectee (Higher Rate for No PAN)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. The TCS analogue of section 206AA; inserted by the Finance Act 2017 with effect from 1 April 2017, with a 20% rate-cap proviso from 1 July 2023.
Finance Act, 2026: No amendment. The Finance Act 2026 makes no change to section 206CC.
Mechanism: A collectee must furnish his PAN to the collector; failing which TCS is collected at the higher of twice the specified rate or five per cent (capped at 20%). A non-resident without a permanent establishment in India is exempt (sub-section (7)).
Litigation profile: Candour rule. No direct case law; construction is governed by analogy to the settled section 206AA jurisprudence — a PAN-default provision cannot override a beneficial DTAA rate.
A. SECTION COMMENTARY
Section 206CC is the TCS analogue of section 206AA: it requires the collectee to furnish his Permanent Account Number to the collector, failing which tax is collected at the higher of twice the specified rate or five per cent (capped at twenty per cent by the proviso inserted with effect from 1 July 2023). It also invalidates a section 206C(1A) self-use declaration that omits the PAN, bars the lower-rate certificate under section 206C(9) unless the application carries the PAN, deems an invalid or mismatched PAN to be no PAN, and — by sub-section (7) — exempts a non-resident without a permanent establishment in India.
The PAN-penalty and its outer limit
Section 206CC is a coercive PAN-compliance measure: its purpose is to make the collectee's PAN available so that the credit for TCS (a deemed payment of his tax under section 206C(4)) can be matched to him. The proviso capping the rate at twenty per cent (from 1 July 2023) confirms that the higher rate is a compliance lever, not a charge. The non-resident-without-PE carve-out in sub-section (7), and the deeming of an invalid PAN to be no PAN in sub-section (6), define the boundaries of the lever.
Can section 206CC override a beneficial treaty rate? — the section 206AA analogy
Section 206CC is judicially untested, but the identical question on its TDS twin, section 206AA, is settled: a procedural PAN-default provision cannot override the beneficial rate guaranteed by a Double Taxation Avoidance Agreement read with section 90(2). The Delhi High Court in Danisco India held that section 206AA does not override section 90(2); Rule 37BC relaxes the PAN requirement for non-residents who furnish prescribed alternative documents. By the same reasoning — reinforced by the express non-resident-without-PE exemption in section 206CC(7) — section 206CC should not be read to defeat a treaty rate. The analogy is offered as cognate, not direct, authority.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Amendment foot-note markers have been resolved into the current operative text; the editorial marker “***” denotes text omitted by the Legislature.
Requirement to furnish Permanent Account number by collectee.
206CC. (1) Notwithstanding anything contained in any other provisions of this Act, any person paying any sum or amount, on which tax is collectible at source under Chapter XVII-BB (herein referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall be collected at the higher of the following rates, namely:— (i) at twice the rate specified in the relevant provision of this Act; or (ii) at the rate of five per cent:
Provided that the rate of tax collection at source under this section shall not exceed twenty per cent.
(2) No declaration under sub-section (1A) of section 206C shall be valid unless the person furnishes his Permanent Account Number in such declaration.
(3) In case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at source in accordance with the provisions of sub-section (1).
(4) No certificate under sub-section (9) of section 206C shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.
(5) The collectee shall furnish his Permanent Account Number to the collector and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.
(6) Where the Permanent Account Number provided to the collector is invalid or does not belong to the collectee, it shall be deemed that the collectee has not furnished his Permanent Account Number to the collector and the provisions of sub-section (1) shall apply accordingly.
(7) The provisions of this section shall not apply to a non-resident who does not have permanent establishment in India.
Explanation.—For the purposes of this sub-section, the expression "permanent establishment" includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.
C. AUTHORITIES
Section 206CC has no direct case law; the candour rule is observed. Its construction is governed, by close analogy, by the settled jurisprudence on its TDS twin, section 206AA — in particular that a PAN-default provision cannot override a beneficial DTAA rate.
Cluster 1 — The section 206AA analogy (PAN-default versus treaty rate)
No reported decision construes section 206CC directly. The decision below construes section 206AA, the materially identical TDS provision, and applies to section 206CC by parity of reasoning; section 206CC(7) independently exempts a non-resident without a permanent establishment.
Danisco India (P) Ltd. v. Union of India (2018) 404 ITR 539 (Del)
Issue: Whether section 206AA — requiring a higher (20%) rate for want of PAN — can override the beneficial rate available under a DTAA read with section 90(2).
Held: No. Section 206AA is a procedural collection provision, not a charging section; it cannot override the beneficial treaty rate under section 90(2). Where tax is withheld at the treaty rate, the Assessing Officer cannot insist on 20% merely for want of PAN. Rule 37BC relaxes the PAN requirement for non-residents furnishing prescribed documents.
Significance: The governing authority by analogy for section 206CC: a PAN-default provision in Chapter XVII cannot defeat a DTAA rate; section 206CC(7)'s non-resident-without-PE exemption points the same way.
Cognate note — Rule 37BC and the wider section 206AA line
Position: The proposition that section 206AA yields to the DTAA where the non-resident furnishes alternative documentation (name, address, country, TRC) has been widely applied; Rule 37BC is its regulatory expression. These authorities construe section 206AA, not section 206CC, and are cited as cognate support pending any direct ruling on section 206CC.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow, spent or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.