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Cost Inflation Index for Income Tax Act-1961.

The Department of CBDT declares the Cost inflation index each year which will be used for Calculation purposes relavant to Income Tax. Say For example cost inflation index is used for Calculation of Capital Gains under sections 54,54B, 54D, 54EC, 54ED of Income Tax Act.1961.

For year 2011-12 Cost Inflation Index is 785. Simlarly for 2012-13 Financial year CII is 852.

Practical Issues in Deducting Higher TDS Rate at 20% as Per Section 206AA of Income Tax Act,1961
Deduction of Higher Rate of TDS under Section 206AA of the Income Tax Act, 1961- Practical Issues

'''Bare Act of Section 206AA ''' 206AA. Requirement to furnish Permanent Account Number.

(1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:— (i) at the rate specified in the relevant provision of this Act; or (ii)  at the rate or rates in force; or (iii)  at the rate of twenty per cent.

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A 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 deductor shall deduct the tax at source in accordance with the provisions of sub-section (1).

(4) No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

(5) The deductee shall furnish his Permanent Account Number to the deductor 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 deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of sub-section (1) shall apply accordingly.

(Source: http://www.exploreincometax.com/Indian-Income-tax-Act-1961/Section-206AA)

PRACTICAL PROBLEMS IN IMPLEMENTING THE SECTION 206AA

Though we deduct TDS @ 20% as per Section 206AA, As per Income Tax, we need to Provide TDS Certificate to Deductor.

For Giving TDS certificate, We need To file 'etds retrun', For which We need PAN.

Though We deduct 20% TDS for a Guy who does not have PAN, We cannot issue TDS Certicate for Such Person who does not have PAN.

He has to apply for PAN for getting Certificate.

Hence it is always advised to First ask the Deductee to Apply PAN & To Ensure that PAN is ready at the time of Deduction Itself