Summary: The article explains CBDT Circular No. 9/2025 dated 21 July 2025, which provides relief from higher TDS/TCS liability under Section 206AA/206CC where the deductee’s/collectee’s PAN was inoperative due to non-linking with Aadhaar but subsequently became operative within prescribed timelines. For property purchases, the article discusses the potential short-deduction demand where TDS was deducted at 1% under Section 393(1) but the seller’s inoperative PAN resulted in application of the higher rate under Section 206AA. The Circular specifies that no liability arises where payment or credit occurred between 01.04.2024 and 31.07.2025 and PAN became operative by 30.09.2025, or where payment or credit occurred on or after 01.08.2025 and PAN became operative within two months from the end of the month of payment or credit. Taxpayers are advised to verify the payment date, PAN status, Aadhaar linkage date, PAN operative date and compliance with the Circular’s conditions. Where a demand has already been raised, supporting documents including TDS payment evidence, Form 141 Challan Cum Statement, sale deed, PAN, PAN-Aadhaar linkage proof and the departmental intimation may be submitted through the prescribed mechanism.
Imagine this
You purchase a property worth ₹2 Crore and, as required under Section 194-IA, you duly deduct and deposit 1% TDS amounting to ₹2 Lakh.
You believe the TDS compliance is complete.
But months later, an intimation lands in your inbox demanding another ₹38 Lakh, along with additional charges.
The reason?
The seller’s PAN was inoperative due to non-linking with Aadhaar, and the Department applied the higher TDS rate under Section 206AA.
Sounds alarming? It is—but this may not necessarily mean that the buyer has to bear the entire demand.
CBDT has provided a specific relief mechanism for such cases, subject to fulfilment of prescribed conditions.
So, before paying a huge TDS demand, there are a few important questions every property buyer and tax professional should check:
When was the payment made? When did the seller’s PAN become operative? Was it made operative within the prescribed time? And what does CBDT Circular No. 9/2025 provide?
Let’s understand, what is the issue?
Under Section 393(1), a buyer purchasing an immovable property (other than agricultural land) is generally required to deduct TDS at 1% of –
(a) Consideration for transfer of the immovable property; or
(b) Stamp duty value of such property,
Whichever is higher, subject to threshold limit of fifty lakh rupees and above.
However, Section 206AA provides for deduction of tax at a higher rate in specified cases where the deductee does not have a valid/operative PAN.
Therefore, where the seller’s PAN is inoperative because of non-linking of PAN with Aadhaar, the buyer may receive a substantial short-deduction demand.
In the above example, the buyer deducted TDS of ₹2 lakh at 1% on a ₹2 crore transaction. If the Department applies the higher rate of 20%, the TDS liability works out to ₹40 lakh along with additional interest on Short Deduction u/s 398(3)(a)(i)
After giving credit for the ₹2 lakh already deducted, the resulting short-deduction demand would be ₹38 lakh and additional interest.
CBDT provides relief
This is where CBDT Circular No. 9/2025 dated 21 July 2025 becomes important. The Circular provides relief in cases where the PAN of the deductee/collectee becomes operative due to Aadhaar-PAN linkage within the prescribed period.
Ø Several grievances have been received by the department from the taxpayers that they are in receipt of 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. In such cases, as the deduction/collection has not been made at a higher rate, demands have been raised by the Department against the deductors/collectors while processing of TDS/TCS statements under section 200A or under section 206CB of the Act, as the case may be.
Ø With a view to redressing the grievances faced by such deductors/collectors, CBDT in its circular specifies that there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC of the Act, as the case may be, in the following cases:
- Where the amount is paid or credited from 01.04.2024 to 31.07.2025 and the PAN is made operative (as a result of linkage with Aadhaar) on or before 30.09.2025.
- Where the amount is paid or credited on or after 01.08.2025 and the PAN is made operative (as a result of linkage with Aadhaar) within two months from the end of the month in which the amount is paid or credited.
What should the taxpayer check?
Before paying a large demand, the following should be carefully verified:
- Date of payment/credit
- PAN status of the seller on the relevant date
- Date on which PAN-Aadhaar linkage was completed
- Date on which the PAN became operative
- Whether the PAN became operative within the prescribed two-month period
- Whether the case satisfies all other conditions of the CBDT Circular.
These dates are critical because the relief is condition-based.
What if a demand has already been raised?
If the deductor has already received a short-deduction intimation, the demand should not be dealt with mechanically.
Where the taxpayer satisfies the conditions of the CBDT Circular, appropriate supporting documents should be compiled and submitted through the prescribed mechanism/authority against the relevant intimation.
Ø The supporting documents may include evidence of:
- TDS deduction and payment;
- Form 141 Challan Cum Statement
- Sale deed/property transaction details;
- Seller’s PAN;
- PAN-Aadhaar linkage proof of Seller;
- Date on which the PAN became operative; and
- Copy of the intimation/order received from the Department.
The Department can examine the documents and, where the prescribed conditions are fulfilled, the consequential demand may be considered for withdrawal/rectification in accordance with the applicable procedure.
The practical takeaway
A property buyer who has received a substantial TDS demand merely because the seller’s PAN was initially inoperative should first verify whether the case falls within the CBDT’s relief mechanism.
§ The key is not merely whether the PAN was inoperative on the date of deduction.
§ The timeline of payment, Aadhaar linkage and PAN becoming operative is crucial.
Therefore, before paying a demand running into lakhs, taxpayers and professionals should carefully examine the applicability of Section 393(1), Section 206AA and CBDT Circular No. 9/2025.
