If PAN-Aadhaar are not linked by May 31, double TDS will be applicable: Check details to avoid penalty

The Income Tax Department in a recent notification has asked the taxpayers to link their Permanent Account Number (PAN) with Aadhaar by May 31 to avoid tax deduction at a higher rate. 

It is to be noted that as per the current regulations if a taxpayer’s PAN is not linked with his or her Aadhaar, Tax Deducted at Source (TDS) is mandated to be deducted at twice the usual rate.

“Linking your PAN with your Aadhaar by May 31 ensures you don’t face higher tax deduction/ tax collection under Section 206AA and 206CC of the Income Tax Act, 1961, due to an inoperative PAN for the transactions entered into before March 31, 2024,” the I-T Department said on social media platform X, formerly Twitter.

In April, the Central Board of Direct Taxes (CBDT) said the deductees (whose tax has been deducted) need to link their PAN and Aadhaar by May 31, 2024, so the deductor (who has deducted the tax) is not liable to pay a penalty for not deducting higher TDS.

The CBDT circular said: “With a view to redressing the grievances faced by such deductors/collectors, the Board, in partial modification and in continuation of the Circular No. 03 of 2023, hereby specifies that for the transactions entered into up to 31.03.2024 and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31.05.2024, there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC, as the case maybe, and the deduction/collection as mandated in other provisions of Chapter XVII-B or Chapter XVII-BB of the Act, shall be applicable.”

The CBDT also explained the rules and the consequences of non-linking of PAN with Aadhaar.

> Section 139AA of the Income Tax Act provides that every individual who has been allotted a permanent account number (PAN) as on the 1st day of July, 2017, and who is eligible to obtain an Aadhaar number, shall intimate his Aadhaar number in the prescribed form and manner. 

> The PAN will become inoperative if one does not link it with Aadhaar till 30th June 2023. 

> However, people who fall under the exempted category will not be subject to the effects of PAN becoming inoperative.

What will happen if Aadhaar and PAN are not linked

> Your PAN will become inoperative if you do not link it with Aadhaar. Taxpayers shall face the following consequences as a result of PAN becoming inoperative:

> Refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made to him;

> Interest shall not be payable to him on such refund for the period, beginning with the date specified under sub-rule (4) of rule 114AAA and ending with the date on which it becomes operative;

> Where tax is deductible under Chapter XVJJ-B in case of such person, such tax shall be deducted at higher rate, in accordance with the provisions of section 206AA;

> Where tax is collectible at source under Chapter XVJJ-BB in case of such person, such tax shall be collected at higher rate, in accordance with the provisions of section 206CC.

Specified Financial Transactions

Besides this, the Income Tax department has also directed reporting entities, such as banks and forex dealers, to file Statement of Specified Financial Transactions (SFT) by the same deadline.

The submission of the Statement of SFT is essential as it allows tax authorities to oversee significant transactions undertaken by individuals. Entities responsible for reporting, such as banks, sub-registrars, mutual fund trustees, and other designated institutions, are mandated to provide comprehensive details of financial transactions or reportable accounts managed by them over the course of the fiscal year.

How to pay late fees for Aadhaar-PAN linking

1. Visit the official e-tax filing website. Go to the Aadhaar-PAN linking story.
2. Select Challan No. ITNS 280 to submit the PAN-Aadhaar link request.
3. Go to applicable tax under Major Head 0021 (Income Tax Other than Companies) and Minor Head 500 (Other Receipts) in a single challan.
4. Choose your preferred payment mode and enter the necessary details, including PAN, address, and assessment year.
5:Enter the Captcha and make the payment.
6. After some time, you can check the receipt of the payment on e-filing portal. Next step will be linking Aadhaar and PAN.

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