No Penalty For Short TDS Deduction If PAN Linked With Aadhaar By May 31

The income tax department has said that no action will be taken for the short deduction of TDS in case the assessee links his or her PAN with Aadhaar by May 31.

As per income tax rules, if a Permanent Account Number (PAN) is not linked with biometric Aadhaar, TDS is required to be deducted at double the applicable rate.

In a circular, the Central Board of Direct Taxes (CBDT) said several grievances have been received from taxpayers that they are in receipt of 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/collectees were inoperative.

In such cases, as the deduction or collection has not been made at a higher rate, demands have been raised by the department against the deductors or collectors while processing TDS or TCS statements.

To redress the grievances faced by such deductors and collectors, the CBDT specified that for “the transactions entered into up to March 31, 2024, and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before May 31, 2024, there shall be no liability on the deductor or collector to deduct or collect the tax (at a higher rate).”.

AKM Global Partner-Tax, Sandeep Sehgal, said the circular gives some relief to tax deductors concerning cases where the PAN of deductees is found to be inoperative due to non-linkage with Aadhaar.

Sehgal said in cases where notices have been received for short deductions 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 or TCS at elevated rates.

“However, at present, no utility is available to verify whether a PAN is operative or not, and the dedutors would have to rely on the deductee for the same. Hence, greater relief could have been provided where the same could have been applicable from the current period along with the introduction of the utility,” Sehgal added.