Now, quote PAN or pay 20% TDS

Not quoting the permanent account number can cost the contractors and sub-contractors dear, as the Budget proposal of taxing them at up to 20 per cent instead of 1-2 per cent comes into effect from Thursday.

The provision, made in Budget 2009-10, is applicable from today and is aimed at plugging the loopholes leading to tax evasion and compelling more and more people to obtain PAN.

At present, contractors and sub-contractors pay tax deducted at source in the range of 1 to 2 per cent only.

From April 1, income tax authorities could impose up to 20 per cent on tax liability them, if they do not provide the PAN, finance ministry sources said.

The ministry sources pointed out that in such a scenario, many small contractors and sub-contractors, who usually don't furnish their PAN, would go unviable, forcing them to fall in line, the sources said.

Also, those who earn interest income from banks would also be required to furnish their PAN from April 1.

Similarly, provision is applicable on royalty or technical fees paid by Indians to non-residents, which attract tax of around 10 per cent at present.

These provisions would help in detecting tax evasion.

Currently, only 3.3 crore (33 million) people are under the income tax net because of massive non-reporting and underreporting of income and exemption.