Table of Contents
- Cbdt Circular : Tds/tcs Relief Due To Inoperative Pan
- Key Points: Tds/tcs Relief Due To Inoperative Pan
- Conditions For Tds/tcs Relief Due To Inoperative Pan
- Steps To Address Tds/tcs Short Deduction Due To Inoperative Pan
- Post-april 1, 2024, Pan-aadhaar Linkage Compliance :
- No Liability With Pan-aadhaar Linkage By May 31, 2024:
- Conclusion:
CBDT Circular : TDS/TCS Relief Due to Inoperative PAN
- The Central Board of Direct Taxes (CBDT) issued a circular providing relief to taxpayers who received tax demand notices due to short deduction of Tax Deducted at Source / Tax Collected at Source. This was in response to numerous grievances from taxpayers who deducted TDS at the normal rate instead of the higher penal rate applicable for inoperative PANs due to non-linkage with Aadhaar.
- Based on the recent CBDT Circular 6/2024 Dated April 23, 2024, the Income Tax Department has provided specific relief regarding the deduction and collection of TDS & TCS in cases where the PAN of the deductee/collectee was inoperative due to non-linkage with Aadhaar. CBDT Circular 6/2024.
Key Points: TDS/TCS Relief Due to Inoperative PAN
- The rule requiring deduction/collection of TDS/TCS at a higher rate under section 206AA/206CC will not apply if the PAN is inoperative due to non-linkage with Aadhaar. Instead, the deduction/collection should be done at the normal rate applicable as if the PAN were operative.
Conditions for TDS/TCS Relief Due to Inoperative PAN
- The transactions subject to TDS or TCS must have been entered into up to March 31, 2024.
- The PAN of the deductee/collectee must become operative (by linking with Aadhaar) on or before May 31, 2024.
- If both the above conditions are met, there will be no liability on the deductor/collector to deduct/collect tax at double the rate. Thus, deductors/collectors will not be required to pay the difference due to short deduction.
- Deductors/collectors can file a revised TDS/TCS return once the PAN becomes operative. This will correct the TDS/TCS entries and ensure compliance.
- For cases where penal interest was already paid due to short deduction/collection of TDS/TCS caused by the inoperative PAN, it is unlikely that this penal interest will be refunded.
Steps to Address TDS/TCS Short Deduction Due to Inoperative PAN
- Verify PAN Status: Ensure that the PAN of the deductee/collectee is now operative by verifying it through the Income Tax Department’s e-filing portal.
File Revised TDS/TCS Return:
- Once the PAN is operative, file a revised TDS/TCS return to correct the entries.
- Ensure that all corrections are made accurately and that the revised return reflects the correct TDS/TCS amounts.
Communicate with the Tax Department:
- If a demand notice was received, respond through the TRACES portal or the Income Tax e-filing portal, indicating that the PAN is now operative and provide proof of correction.
- Attach necessary documents such as the PAN card, Aadhaar linking acknowledgment, and proof of the revised TDS/TCS return filing.
Post-April 1, 2024, PAN-Aadhaar Linkage Compliance :
No Liability with PAN-Aadhaar Linkage by May 31, 2024:
- If the PAN of the deductee is linked with Aadhaar and becomes operative by May 31, 2024, there will be no liability to deduct or collect tax at the higher rate under sections 206AA/206CC. By taking advantage of the grace period and relief measures, taxpayers can effectively manage compliance and avoid undue penalties. CBDT Circular 6/2024 serves as a tool to navigate the evolving tax landscape with greater ease and confidence.
- For transactions occurring on or after April 1, 2024, it becomes critical to ensure the validity of PAN linked with Aadhaar. Taxpayers can utilize the facilities provided by the income tax portal to verify PAN-Aadhaar linkage and avoid penalties.
Conclusion:
- CBDT Circular 6/2024 is aimed at rectifying situations where deductors or collectors were required to deduct or collect tax at a higher rate due to the inoperative PAN of the payee. The CBDT circular offers relief to those who, due to unawareness, deducted or collected tax at a normal rate for transactions conducted up to March 31, 2024.
- Now, these deductors or collectors have the opportunity to request the payee to link their PAN with Aadhaar before May 31, 2024. By doing so, they can avail the benefit of the extended deadline and reduce the tax demand that may have been raised due to the shortfall in tax deduction or collection. It seems like a proactive measure to mitigate unintended tax consequences arising from PAN-Aadhaar linkage issues.
- What happened when employer does not provide form 16?
