Inoperative PAN resulting in TDS notice to deduct TDS at the rate of 20%. Here’s why?
Due date for linking PAN and Aadhar finally expired on 30.06.2023 and after which all the PAN which were not linked with Aadhar became inoperative which was mentioned CBDT in it’s earlier Press Release.
To read Press release CLICK ME.
In the Press there were other points also mentioned which are as under:
From 1st July, 2023, the PAN of taxpayers who have failed to intimate their Aadhaar, as required, shall become inoperative and the consequences during the period that PAN remains inoperative will be as follows:
- no refund shall be made against such PANs;
- interest shall not be payable on such refund for the period during which PAN remains inoperative; and
- TDS and TCS shall be deducted /collected at higher rate, as provided in the Act.
As per the above points it was mentioned that TDS/ TCS needs to be deducted/ collected at higher rates. This is what has happened in the second quarter TDS return which has been processed wherein since after 30.06.2023 all the PAN which were not linked with Aadhar became inoperative hence, it will be considered as no PAN was furnished and accordingly higher TDS of 20% shall be charged u/s 206AA of the Act.
CBDT had released a utility for checking applicability of Section 206AB and 206CCA and this utility could be helpful in checking the applicability of Section 206AA also.
To read about the utility CLICK ME.
Hence, now everyone while onboarding a vendor as well as while deducting TDS has to first check whether PAN of vendor is active or not and if it is not active then vendor should be informed to get it linked otherwise TDS will be deducted at higher rate.
As of now, all those whose PAN have become inoperative should link their PAN and Aadhar by paying a fees of Rs. 1000/- to government as it will take 4-5 days to link PAN and Aadhar.
To know more on how to link PAN and Aadhar CLICK ME.
Now, it will be interesting to see that those whose PAN were shown as inoperative in TDS return of Quarter 2, will CBDT remove it’s demand if they link PAN and Aadhar now or whether the linking will be effective prospectively.
Guidance on above article for Indian Income Tax by:
Naman Maloo (C.A., B.Com)
He is currently working as Partner – Direct Tax with a renowned firm in Jaipur having experience in dealing Assessments before Income Tax authority, Tax Audit, International Taxation, Tax planning for NRI, Business planning and consultation.
E-mail: naman.maloo@jainshrimal.in | LinkedIn: Naman Maloo
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