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What happens when wrong PAN number is mentioned while depositing TDS

I have a query regarding the income from other sources(Bank FDs). I have a salary account with a private bank. I gave my PAN number while opening the account but somehow bank has updated it incorrectly. There is a one letter mismatch in the PAN number. 1. I want to ask, what will happen to the TDS which is deducted by bank for the interest on FDs(FDs which I have made in the bank)? 2. Am I right in saying that this TDS will not be reflected in my Form 26AS? 3. Is it also true that Income Tax department will not come to know about the income by these FDs and also the TDS that is deducted by the bank on the interest earned on these FDs? 4. In my case, bank is deducting 10% TDS on the interest earned on FDs. I come in 30% tax bracket. As my PAN is wrong with bank, the income and TDS, both are not shown in Form26AS. I do not have to pay extra 20% tax on this interest income because it is not updated in form 26AS. If I update the PAN in my bank account, both income and TDS will start showing in Form 26AS correctly. And then I have to pay extra 20% tax on this income earned by interest. So, won't it will be a loss of 20% tax for me?

Sep 9, 2015 by Saurabh, Ghaziabad  |   Taxation

Please see the answers to your question below:-

Question: I want to ask, what will happen to the TDS which is deducted by bank for the interest on FDs (FDs which I have made in the bank?

Answer: The bank should ensure proper tax deduction at source. In your case, since the PAN is incorrect in the TDS, they may get a notice for Income Tax authorities for . The bank will have to file a revised TDS return.

Question: Am I right in saying that this TDS will not be reflected in my "Form 26AS"

Answer: That is correct.

Question: Is it also true that income tax department will NOT come to know about the income by these FDs and also the TDS that is deducted by the bank on the interest earned on these FDs?

Answer: Your assumption is NOT correct. In your case there can be three possible situations. First, if the PAN applied against the TDS of your FD income is an invalid PAN, in other words, if the PAN does not exist, then the reconciliation process run by the Income Tax processing unit will identify a discrepancy and they will send a notice to the deductor (in your case the bank). Second, if the PAN applied against the TDS of your FD income is a valid PAN, but belongs to a different person, then that person will notice it in his or her Form 26AS. He or she may bring this to the notice of the Income Tax Authorities and file the correct income tax return. He or she may also inform the deductor (i.e. your bank). Third, if the PAN applied against the TDS of your FD income is a valid PAN, but belongs to a different person and that person does not notice while filing his or her income tax return, he or she will get a notice from the tax authorities for not disclosing the income against the TDS credit in his or her 26AS. The assessee will then respond to the income tax authorities.

Question: In my case, bank is deducting 10% TDS on the interest earned on FDs. I come in 30% tax bracket. As my PAN is wrong with bank, the income and TDS, both are not shown in Form26AS. I do not have to pay extra 20% tax on this interest income because it is not updated in Form26AS. If I update the PAN in my bank account, both income and TDS will start showing in Form26AS correctly. And then I have to pay extra 20% tax on this income earned by interest. So, won't it will be a loss of 20% tax for me?

Answer: While ensure proper tax deduction at source is definitely the responsibility of the deductor, in this case your bank, it is your obligation to file the correct income tax returns and pay the correct income tax. As discussed above the trail may lead to you if you do not file the correct returns. If you file the wrong returns, you may be liable not just to pay the additional 20% tax, but also to pay a penalty and also interest on delayed tax payment. Since there is only one letter mismatch in the PAN, in case the bank gets a notice from the income tax authorities, they will do the necessary rectification in the revised TDS return and avoid any additional demand from the tax authorities. You should inform the bank of the incorrect TDS, so that they rectify it and ensure proper TDS credit for you.

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