Introduction
The Income Tax Department has provided relief to taxpayers in the form of a much-needed clarification regarding the linking of PAN with Aadhaar and its implications on Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). The new directive, Circular No. 6/2024, addresses the concerns of deductors/collectors and outlines the steps to ensure compliance without incurring penalties. Let’s unpack the circular to understand what it means for you.
Key Points from Circular No. 6/2024
- Deadline Extension: The Central Board of Direct Taxes (CBDT) has extended the deadline for linking PAN with Aadhaar to May 31, 2024, applicable to transactions up to March 31, 2024.
- Relief on TDS/TCS Rates: If the PAN becomes operative by being linked to Aadhaar on or before May 31, 2024, the deductors are not in default for collecting TDS/TCS at the normal rate instead of the higher rate mandated by sections 206AA/206CC for inoperative PANs.
- Prevention of Demands: For transactions entered up to March 31, 2024, no demands will be raised for short-deducted TDS/TCS due to PAN-Aadhaar non-linkage, provided the PAN is linked and becomes operative by the stipulated date.
Implications for Taxpayers and Deductors
This circular provides significant relief for taxpayers, especially for those who have faced notices due to short deductions related to property purchases. It’s a proactive step by the Income Tax Department to alleviate undue hardships:
- Transactions before March 31, 2024: Deductors should not be deemed in default for TDS deductions at the normal rate if the deductee’s PAN is linked to Aadhaar by May 31, 2024.
- Avoidance of Higher TDS: There is no liability to deduct TDS at the higher rate under sections 206AA/206CC if the PAN becomes operative through linking with Aadhaar within the given timeframe.
How to Comply?
- Link PAN and Aadhaar: Ensure that the linking of PAN with Aadhaar is completed before May 31, 2024, to avoid 20% TDS deductions and demands for payments.
- Revise Returns if Necessary: If you’ve received a notice for short deduction/collection due to non-linking of PAN with Aadhaar, you can rectify this by linking the PAN with Aadhaar and revising your TDS/TCS returns accordingly.
FAQs on PAN-Aadhaar Linking and TDS/TCS
Q1: What is the new deadline for linking PAN with Aadhaar?
A1: The deadline is extended to May 31, 2024.
Q2: If I have deducted TDS at the normal rate due to an inoperative PAN, what should I do?
A2: Link the PAN with Aadhaar by the new deadline and revise the TDS/TCS return if necessary.
Q3: Will I be penalized for not deducting TDS at a higher rate due to the PAN-Aadhaar issue?
A3: No, as per the circular, you will not be penalized if you rectify the linkage by May 31, 2024.
Conclusion
The recent circular from the CBDT is a commendable step towards simplifying tax compliance and offering relief to taxpayers and deductors/collectors. By adhering to the new guidelines and ensuring that PAN and Aadhaar are linked by the new deadline, you can avoid higher TDS/TCS deductions and subsequent demand notices. Stay informed and compliant, and visit our eFileTax Blog for more updates and guidance on tax-related matters.