CBDT gives relief in cases where PAN, Aadhaar aren't linked: Know more

No action will be taken against taxpayers for short deduction in TDS, it says

The Income Tax department has said that if Income Tax assesses link their PAN with Aadhaar by May 31, no action will be taken against them for short deduction in TDS.

Short deduction of TDS, as per the provisions of the Income Tax Act, 1961, refers to a situation where the amount of tax deducted or collected by the deductor or collector is less than the amount that should have been. If a PAN (Permanent Account Number) is not linked with biometric Aadhaar, TDS (Tax Deducted at Source) is required to be done at double the applicable rate in short deduction.

According to news reports, several TDS deductors had received Income Tax notices due to the above issue.

Relief to taxpayers

The Central Board of Direct Taxes (CBDT) said in a circular several grievances have been received from taxpayers that they are in receipt of notices saying that they have committed default of 'short-deduction/collection' of TDS/TCS while carrying out transactions where the PAN of the deductees/collectees were inoperative.

To redress the grievances faced by such deductors/collectors, the CBDT said that those deductors/collectors of TDS/TCS will get relief where following conditions are met:

Transactions (which are subject to TDS or TCS) were entered into up to March 31, 2024.

The deductee’s/collectee’s PAN should become operative (as a result of linkage with Aadhaar) on or before May 31, 2024.

Sandeep Sehgal, partner - tax at AKM Global, said the circular gives 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 deduction due to this issue, it is advisable to promptly ensure PAN linkage with Aadhaar by reaching out to the deductee before May 31, 2024. The CBDT’s decision offers relief to deductors, sparing them from the requirement to deposit or collect TDS/TCS at elevated rates.