Relief to TDS Deductors wrt Inoperative PANs

Central Board of Direct Taxes (CBDT) has issued Circular No. 6 dated 23^rd April 2024, to provide a relief to deductors/collectors who have collected TDS/TCS at normal rate but was required to

• deduct TDS at specific rate or 20% (except in case of Sec 194 O and Sec 194 Q where rate is 5%) whichever is higher
• collect TCS at double the rate specified or 5% (except in case of Sec 206C(1H) where rate is 1%) whichever is higher

on account of PAN of the deductee being inoperative due to non-linkage of such PAN with Aadhar from 1st July 2023.

Q. 1 What was the provision existing prior to circular?

Ans – The following consequences will follow wherein PAN is inoperative due to non -linking of such PAN with Aadhar:

• Deductors/collectors are required to deduct/collect TDS/TCS at higher rate as mentioned above.
• Refund of any amount of tax or any interest payable on such refund shall not be paid to the person.

Q. 2 What were the purpose of this circular?

Ans – Notices were issued in respect of short deduction/collection of TDS/TCS in respect of persons having inoperative PAN and Demands have been raised for not deducting/collecting TDS/TCS at higher rate while processing statements under Sec 200A and Sec 206CB of the Act.

Q.3 What is the relief measures set out in CBDT circular?

Ans – In continuation of Circular No 3 of 2023 specifies that there will be no liability on the deductor/collector the tax for higher rate in following circumstances:

• Wherein transactions were entered into with persons having inoperative PAN upto 31^st March 2024
• In cases, where PAN become operative (linking of PAN and Aadhar) on or before 31^st May 2024.

Q.4 What will the impact on deductors/collectors considered in default?

Ans – Deductors/Collectors are not to be treated as TDS/TCS deductors in default for short deduction/collection of tax and they are not required to pay the difference.

Q-5 What is the status of transaction entered into with persons having inoperative PAN upto 31^st March 2024?

Ans – There is absolutely no liability for deduction/collection of TDS/TCS at higher rates as per Sec 206AA and Sec 206CC.

Q-6 What is the scenario after 1^st April 2024?

Ans – It is important to ensure that PAN is linked with Aadhaar and remains valid for all transactions occurring on or after 1^st April 2024 as they will attract TDS/TCS deductions and collections at higher rate in case of inoperative PAN.

The Income Tax portal offers a feature to check the PAN-Aadhar link status. It is recommended to link PAN and Aadhar as soon as possible to avoid any consequences.

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Source Info: https://www.incometax.gov.in/