The CBDT, aiming to address grievances of deductors/collectors who collected TDS/TCS at the normal rate but were required to deduct/collect at double the rate due to the deductee’s PAN being inoperative (unlinked with Aadhar) since April 1, 2023, issued Circular No. 6 on April 23, 2024. This circular prevents treating such TDS deductors as in default (for short deduction) if, by May 31, 2024, the deductee’s PAN is linked to Aadhar, rendering it operative for transactions until March 31, 2024. Consequently, no liability arises for deductors/collectors to deduct/collect tax under sections 206AA/206CC at double the rate due to PAN inoperability, and they need not pay the difference. Recently, many notices have been issued to deductors for shortfalls in tax deduction because the deductee’s PAN was found inoperative.
Therefore, if notices have been received for short deduction due to this reason, it is advisable to promptly ensure the deductee links their PAN with Aadhar, ideally by May 31, 2024. It’s important to note that this relief applies to transactions until March 31, 2024. Hence, for transactions from April 1, 2024, ensure the deductee’s PAN is linked with Aadhar and valid. The facility to verify PAN validity is available on the income tax portal.
Circular No. 6/2024
F.No. 275/4/2024-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, the 23rd April, 2024
Sub: Partial modification of Circular No. 3 of 2023 dated 28.03.2023 regarding consequences of PAN becoming inoperative as per rule 114AAA of the Income-tax Rules, 1962- reg.
Circular No. 3 of 2023 dated 28.03.2023 issued by the Board details the consequences of PAN becoming inoperative as under:
“Consequent to the notification substituting rule 114 AAA of the Income-tax Rules, 1962 (the Rules) vide notification no. 15 of 2023 dated 28th March, 2023, it is hereby clarified that a person who has failed to intimate the Aadhaar number in accordance with section 139AAA of the Income-tax Act, 1961 (the Act) read with rule 114AAA shall face the following consequences as a result of his 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 XVII-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 XVII-BB in case of such person, such tax shall be collected at higher rate, in accordance with the provisions of section 206CC.”
2. As per sub-rule (4) of rule 114AAA of the Income-tax Rules, 1962, the above consequences shall have effect from the date specified by the Board. The Board vide Circular No. 03 of 2023 dated 28th March, 2023 had specified that the consequences shall take effect from 1st July, 2023 and continue till the PAN becomes operative.
3. Several grievances have been received 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 maybe.
4. 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 upto 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.
5. Hindi version to follow.
(Sunil Kumar)
Under Secretary to the Government of India
Tele: 23095478
Copt to:-
1. PS to FM/OSD to FM/PS to MoS (R)/OSD to MoS(R)
2. PPS to Secretary (Revenue)
3. The Chairman, CBDT & all Members, CBDT
4. All Pr.CCsIT, CCsIT/Pr.DGIT/DGsIT
5. All Joint Secretaries/CsIT, CBDT
6. Pr. Commissioner of Income-tax (Media & TP) and official Spokesperson, CBDT, New Delhi
7. CIT, (CPC-TDS)
8. ADG (PR,P&P) for necessary action
9. JCIT, Database Cell, with a request to upload the order on the website www.irsofficersonline.gov.in
10. Web Manager, 0/o DGIT(Systems) with a request to upload the order on the website of website.incometaxindia.gov.in
11. The Institute of Chartered Accountants of India, IP Estate, New Delhi
12. All Chambers of Commerce
13. The Guard File
(Sunil Kumar)
Under Secretary to the Government of India
Tele: 23095478
Either refund can be claimed by the deductee against the TDS appearing in 26AS or rectification return can be filed by the Deductor and balance in challan may be used against actual TDS to be deposited on new TDS liability occurring to the deductor.
What will happen to the amount that is already paid? Can we apply for a refund for that amount?