TDS/TCS on death of Person before linking of PAN & Aadhaar

The Central Board of Direct Taxes  has issued Circular No. 8 of 2024 on August 5, 2024, providing relaxations in the TDS and TCS (Tax Collected at Source) provisions under the Income-tax Act, 1961, in the event of the death of the deductee/collectee before the linking of their Permanent Account Number and Aadhaar. This easing the compliance burden for the families of deceased individuals and ensuring that they are not subjected to higher TDS/TCS rates due to the non-linking of PAN and Aadhaar posthumously.

Key Highlights of Circular No. 8 of 2024: TDS/TCS provisions on death of deductee/collectee

• In cases where the deductee or collectee has passed away before their PAN and Aadhaar could be linked, higher rates of TDS or TCS as specified under Section 206AA and 206CC of the Income-tax Act will not be applicable.  The relaxations will apply from the date of death of the deductee/collectee until the end of the financial year in which the death has occurred or until the PAN and Aadhaar are linked, whichever is earlier.
• To avail of the benefits under this circular, the deductor or collector must maintain and provide appropriate documentation evidencing the death of the deductee/collectee, such as the death certificate issued by a competent authority.
• If a deductee or collectee has passed away on or before May 31, 2024, and before they could link their PAN and Aadhaar, the deductor or collector will not be liable to deduct or collect tax under the relevant sections of the Income-tax Act for transactions up to March 31, 2024.
• On April 23, 2024, the CBDT extended the deadline for linking PAN and Aadhaar to May 31, 2024. This extension aims to help taxpayers avoid higher TDS/TCS rates for transactions entered into up to March 31, 2024.
• Under the Income-tax Act, 1961, every person who has been allotted a PAN as of July 1, 2017, and is eligible to obtain an Aadhaar Number, must intimate their Aadhaar to the prescribed authority upon payment of a prescribed fee. Failure to do so will result in specific repercussions. This circular provides significant relief to families of deceased individuals by ensuring they are not subjected to higher TDS/TCS rates due to the inability to link PAN and Aadhaar posthumously.

Consequences of PAN Becoming Inoperative:

• If taxpayers fail to link their PAN with Aadhaar by the specified deadline, their PAN will become inoperative. The consequences during the period that PAN remains inoperative include:
  • No refunds will be issued against such PANs.
  • TDS and TCS will be deducted or collected at a higher rate as stipulated in the Income-tax Act.
  • No interest will be payable on refunds for the period during which the PAN remains inoperative.
• Taxpayers must ensure that their PAN and Aadhaar are linked by the extended deadline to avoid the consequences of their PAN becoming inoperative. All other TDS and TCS provisions and compliance requirements under the Income-tax Act, 1961, will continue to apply as usual.

You may refer CBDT Circular No. 8 of 2024 :