In partial relief to tax deductors in cases where Permanent Account Number (PAN) has become inoperative due to non-linkage with Aadhaar, the Central Board of Direct Taxes has now said that TDS or TCS will not be deducted at a higher rate for transactions up to March 31, 2024, and where the PAN becomes operative by May 31 this year.
The decision comes in the wake of several grievances from the taxpayers that they have received notices intimating that they have committed default of ‘short-deduction/collection’ of TDS/TCS while carrying out the transactions where the PANs of the deductees or collectees were inoperative.
“In such cases, as the deduction/collection has not been made at a higher rate, demands have been raised by the Department against the deductors/collectors while processing of TDS/TCS statements under section 200A or under section 206CB of the Act, as the case maybe,” the CBDT said in a recent circular.
After giving several extensions, the CBDT had said that PANs not linked to Aadhaar would become inoperative from July 1, 2023. In such cases, the taxpayer would also not be able to use several services. Pending income tax returns would also not be issued and TDS and TCS would be deducted at a higher rate in these cases. A late penalty of Rs 1,000 is also levied on persons who link their PAN with Aadhaar post the deadline.
Experts said the recent circular by CBDT presents some relief to tax deductors concerning cases where the PAN of deductees is found to be inoperative due to non-linkage with Aadhaar.
Sandeep Sehgal, Partner- Tax, AKM Global, a tax and consulting firm said that in cases where notices have been received for short deduction due to this issue, it is advisable to promptly ensure PAN linkage with Aadhaar by reaching out to the deductee, ideally before May 31, 2024. “This provision offers considerable relief to deductors, sparing them from the requirement to deposit or collect TDS/TCS at elevated rates,” he said.
However, at present, no utility is available to verify whether a PAN is operative or not and the deductors would have to rely upon deductee for the same, he pointed out, adding that greater relief could have been provided where the same could have been applicable from the current period along with the introduction of the utility.
According to official data, as many as 11.48 crore PANs had not been linked to Aadhaar as on January 29, 2024. In a written reply to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary had said that the government had collected ?601.97 crore from July 1, 2023 to January 31,2024 as penalty for late linking of PAN and Aadhaar.
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