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The Central Board of Direct Taxes (CBDT) has taken a significant step towards addressing the grievances of deductors and collectors who have encountered challenges due to the inoperability of PAN linked with Aadhaar. Circular No. 6, issued on April 23, 2024, aims to provide relief to those who have collected Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) at the normal rate but were required to deduct or collect at a higher rate due to PAN inoperability.
Background:
Since April 1, 2023, there has been a requirement to deduct or collect TDS/TCS at higher rate if the PAN of the deductee is inoperative due to non-linkage with Aadhaar.
Objective:
The circular intends to alleviate the burden on deductors/collectors who have faced notices for short deduction because of PAN inoperability. It provides a grace period for rectifying PAN-Aadhaar linkage issues.
Relief Measures:
Deductors/collectors will not be treated as defaulters for tax deducted at the normal rate for transactions conducted until March 31, 2024.
If the PAN of the deductee is linked with Aadhaar and becomes operative by May 31, 2024, there will be no liability on the deductor/collector to deduct/collect tax at higher rate under sections 206AA/206CC.
This relief applies specifically to transactions executed up to March 31, 2024.
Notice Resolution:
For those who have received notices for short deduction due to PAN inoperability, it is advisable to promptly ensure PAN-Aadhaar linkage with the deductee.
Action must be taken to link PAN with Aadhaar by May 31, 2024, to avoid any adverse consequences.
Post-April 1, 2024:
For transactions occurring on or after April 1, 2024, it is essential to ensure that the PAN of the deductee is linked to Aadhaar and remains valid.
The income tax portal provides a facility to verify the validity of PAN linked with Aadhaar.
