- The Central Board of Direct Taxes (CBDT) has officially announced an extension of the deadline for the linkage of Permanent Account Numbers (PAN) with Aadhaar until May 31, 2024. This extension is applicable to all transactions conducted up to March 31, 2024, and is intended to mitigate the risk of elevated Tax Deducted at Source (TDS) rates resulting from inoperative PANs. Taxpayers and those responsible for deducting TDS/TCS are strongly advised to comply with this linkage requirement by the revised deadline to avoid operational inconveniences. The decision by the CBDT to extend this deadline is in direct response to the challenges faced by taxpayers, particularly those who have received notices for higher TDS due to unlinked and thus inoperative PANs.
CBDT Circular No. 6 of 2024: Relaxations and Modifications on PAN-Aadhaar Linking Requirements
The CBDT Circular No. 03 of 2023, updated by Circular No. 6 of 2024, provides specific instructions and relaxations regarding the linking of Aadhaar with PAN (Permanent Account Number). Here are the details elaborated from the circular:
Instructions and Consequences for Non-Linking of Aadhaar with PAN
1. If an individual fails to link their Aadhaar with PAN, the PAN becomes inoperative, leading to several consequences:
– No tax refunds will be issued.
– No interest on such refunds for the period the PAN remains inoperative.
– Higher rates of tax deduction at source (TDS) under Chapter XVII-B.
– Higher rates of tax collection at source (TCS) under Chapter XVII-BB.
These consequences were originally set to take effect from July 1, 2023, and continue until the PAN becomes operative again.
Relaxations Provided in the CBDT Circular No 6/2024 of Income Tax
2. Addressing Grievances and Relaxations:
- The CBDT received grievances from taxpayers and deductors/collectors who faced difficulties due to the inoperative status of PANs. Specifically, issues arose from ‘short-deduction/collection’ of TDS/TCS in transactions involving inoperative PANs.
- In response, Circular No. 6 of 2024 modifies the previous stipulations by providing relaxations for transactions entered up to March 31, 2024. If the PAN becomes operative (linked with Aadhaar) on or before May 31, 2024, the deductors/collectors will not be liable to deduct/collect tax at the higher rates specified under sections 206AA/206CC.
3. Applicability of Standard Deduction/Collection Rates:– For transactions up to the specified date, where the PAN is made operative by the deadline, standard deduction and collection rates under other provisions of the Income-tax Act will apply instead of the elevated rates.
These updates aim to mitigate the impact on taxpayers and financial agents caused by the inoperative status of PANs due to non-linkage with Aadhaar. The circular acknowledges the administrative challenges and aims to provide a buffer period for compliance, thereby reducing the immediate financial and operational burdens.
Key Updates and Guidelines for Linking Aadhaar with PAN: CBDT Circular No. 03 of 2023 under Income Tax Act 1961
PAN-Aadhaar linking guidelines issued by the Central Board of Direct Taxes (CBDT) regarding the consequences of not linking Aadhaar with the Permanent Account Number (PAN).
1. Consequences of Non-linkage: If an individual fails to link their Aadhaar with PAN as mandated under section 139AA of the Income-tax Act, the PAN will become inoperative. This leads to several consequences:
- No tax refunds will be issued.
- No interest will be payable on such refunds for the period the PAN remains inoperative.
- Higher rates of tax will be deducted at source.
- Higher rates of tax will be collected at source.
- 2. Effective Date and Fees: These consequences are effective from 1st July 2023. A fee of one thousand rupees is required to reactivate the PAN by linking it with Aadhaar.
3. Exemptions: The consequences do not apply to individuals exempted from linking Aadhaar under subsection (3) of section 139AA.
CBDT Circular No. 03 of 2023 under Income Tax Act 1961
