Income Tax News: CBDT Circular Eases TDS Concerns! No Penalty if You Do This With Your PAN Card by May 31, Check Details

Income Tax News: According to the Income Tax Department, taxpayers who link their PAN to Aadhaar before May 31 would not face any consequences for a lower TDS deduction. Income Tax regulations provide that "Tax Deducted at Source" (TDS) would be assessed at twice the applicable rate if the Permanent Account Number (PAN) is not connected to the biometric Aadhaar.

Taxpayer Complaints to CBDT

According to a circular from the Central Board of Direct Taxes (CBDT), taxpayers have complained to the CBDT on multiple occasions that they have received notices regarding this matter. According to the notification, they failed to deduct or collect short TDS or TCS when conducting transactions in which the PAN was not working. In some situations, the Department has enhanced the tax demand during the processing of TDS/TCS statements because the deduction or collection has not been done at the higher rate.

CBDT Circular Addressing Taxpayer Grievances

The CBDT circular dated April 23, 2024 states: "With a view to redressing the grievances faced by such deductors/collectors, the Board, in partial modification and in continuation of the circular no 3 of 2023, hereby specifies that for the transactions entered into up to 31.03.2024 and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31.05.2024, there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC, as the case maybe, and the deduction/collection as mandated in other provisions of Chapter XVII-B or Chapter XVII-BB of the Act, shall be applicable,”.

CBDT Provides Relief for Deductors and Collectors

"If PAN is activated (after linking with Aadhaar) on or before May 31, 2024, in respect of transactions made up to March 31, 2024, then there will be no liability on the deductor/collector to deduct/collect tax (at higher rate)," the CBDT stated in response to the concerns made in this regard.

The circular, according to Sandeep Sehgal, partner (tax) at AKM Global, provides some relief to tax deductors in situations where PANs are inactive because they are not connected to Aadhaar. According to him, taxpayers in these situations ought to connect PAN and Aadhaar as quickly as feasible.