Firms, businesses can collect TDS/TCS at normal rates even if PAN-Aadhaar not linked

There is relief in store for companies and businesses with the Income Tax Department on Wednesday saying that these entities will not be treated as defaulters if they get TDS (tax deducted at sources)/TCS (Tax collected at sources) at the normal rate from individuals even if their PAN is not linked with Aadhaar. This will be subject to certain conditions.

According to a circular by the Central Board of Direct Taxes (CBDT), if a PAN becomes “inoperative” due to its non-linkage with Aadhaar and causes a problem with a tax deduction, the deductor will not face penalties for deducting less tax than required. This is provided the deductee links his/her PAN with Aadhaar and makes it usable again by May 31, 2024. As a result, deductors are no longer liable to pay the di£erence in income tax rates.

DEFAULT NOTICE

June 30, 2022 was the last date to link PAN with Aadhaar without any fee. From July 1, 2022 to June 30, 2023, it was allowed with a late fee of ₹1,000. If someone did not link his PAN with Aadhaar, it became inoperative from July 1, 2023. However, there was one more window post on or after July 1 2023 under which a penalty of ₹1,000 was imposed to make the PAN operative again.

Meanwhile, many businesses got notices intimating that they have committed default of ‘short-deduction/collection’ of TDS/TCS while carrying out the transactions where the PANs of the deductees/collectees were inoperative. They were also asked to pay the di£erential. Taking note of representations made by these businesses, Income Tax Department came out with new circular to provide conditional relief.

Ved Jain, Former President of Institute of Chartered Accountants in India said where notices have been received for short deduction, it would be advisable to reach out to the deductee and get his PAN linked with Aadhar immediately. According to Sandeep Sehgal, Partner (Tax) with AKM Global, this provision offers considerable relief to deductors, sparing them from the requirement to deposit or collect TDS/TCS at elevated rates.