No Liability to Deduct/Collect Tax at Higher Rates if Payee Links Pan-Aadhaar by May 31, 2024 | CBDT

Circular no. 6/2024, dated 23-04-2024

Rule 114AAA lists down consequences that apply if the PAN of a person becomes inoperative due to non-linking with his Aadhaar. One of the consequences listed is tax shall be deducted/collected at a higher rate in accordance with section 206AA/206CC.

The Central Board of Direct Taxes (CBDT) vide Circular No. 3 of 2023 dated 28.03.2023 clarified that all the consequences provided under the Income-tax Act should take effect from July 1 2023, and continue till the PAN becomes operative.

The Board noticed that taxpayers were complaining about getting notices for not deducting/collecting enough TDS/TCS towards payees’ who have inactive PANs. This results in demands from the Department against deductors/collectors during TDS/TCS statement processing.

In response to complaints, the Board has decided to modify Circular No. 03 of 2023. The CBDT has specified that for transactions up to March 31, 2024, if the PAN becomes active (linked with Aadhaar) by May 31, 2024, there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC. Tax shall be deducted/collected as per the relevant provisions of the Act.

However, the circular failed to clarify what actions should be taken concerning demands that have already been settled or remain outstanding.

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