PAN-Aadhaar Non-Linking: Relief to Taxpayers who got shorter TDS/TCS Deduction demand due to inoperative PAN

The Central Board of Direct Taxes (CBDT) has offered relief to the taxpayers from penalties and higher tax deductions due to cs of deductees. The CBDT had earlier specified that if the person’s PAN is not linked with their Aadhaar Card, it would become inoperative from July 1, 2023, until the PAN becomes operative again. Later, in another circular dated 23.04.2024, issued by CBDT, relief was provided to the deductors and collectors from applying higher TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) for transactions done up to March 3, 2024, if the PAN was linked with the Aadhaar before May 31, 2024.

However, after these updates, many deductors and collectors received notices from the Income Tax Department for short deduction or collection of tax while doing transactions with the deductees and collectees whose PANs were inoperative. Due to this, the Tax Department raised demand against the deductors or collectors. Many taxpayers raised their objections and complaints after facing this problem.

To solve this problem, the CBDT has made some updates in the earlier circular, where it has stated that there will be no liability on the deductors and collectors to deduct or collect TDS/TCS under section 206AA or 206CC of the Income Tax Act in the following cases:

• If the amount is paid or credited from 01.04.2024 to 31.07.2025 and the PAN is made operative on or before 30th September 2025.
• If the amount is paid or credited on or after 01.08.2025, and the PAN is made operative within two months from the end of the month in which payment was made.