CBDT Relaxes TDS/TCS for PAN-Aadhaar Linking

The Central Board of Direct Taxes (CBDT) has issued Circular No. 9/2025, dated July 21, 2025, partially modifying its earlier Circular No. 3 of 2023 regarding the consequences of an inoperative Permanent Account Number (PAN). Previously, if a PAN was inoperative due to a lack of Aadhaar linkage, higher rates of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) under Sections 206AA or 206CC of the Income-tax Act, 1961, were applicable. This led to grievances from deductors and collectors who received notices for “short-deduction/collection” when transacting with inoperative PANs, resulting in demands raised by the Income Tax Department. To address these concerns, the CBDT has provided relief: for amounts paid or credited between April 1, 2024, and July 31, 2025, deductors/collectors will not face higher TDS/TCS liability if the deductee’s/collectee’s PAN becomes operative (linked with Aadhaar) by September 30, 2025. Furthermore, for payments or credits made on or after August 1, 2025, the relief applies if the PAN is made operative within two months from the end of the month in which the amount is paid or credited. In these specified instances, the regular TDS/TCS rates, as per other provisions of the Act, will be applicable.

F. No. 275104/2024-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi

Circular No. 9/2025 Dated: 21st July, 2025

Subject: 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.

The Central Board of Direct Taxes (hereinafter ‘the Board’) vide Circular No. 03 of 2023 dated 28th March, 2023 had specified that the consequences of PAN becoming inoperative as per Rule 114AAA of the Income-tax Rules, 1962 shall take effect from 1st July, 2023 and continue till the PAN becomes operative. Further, Circular No. 06 of 2024 dated 23.04.2024 issued by the Board, provided relief to deductors/collectors from the applicability of higher TDS/TCS rates under section 206AA/206CC of the Income-tax Act, 1961 (hereinafter ‘the Act’) for transactions entered into upto 31.03.2024, where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31.05.2024.

2. 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.

3. With a view to redressing the grievances faced by such deductors/collectors, the Board, in partial modification and in continuation of the Circular No. 3 of 2023, hereby 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 maybe, in the following cases:

i. 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.

ii. 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 .

4. In the above-mentioned cases, 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.

(Rubal Singh)
Deputy Secretary to the Government of India
Tele: 23095462

Copy to:-

1. The Chairman, CBDT & all Members, CBDT

2. All Pr. CCsIT, CCsIT/Pr. DGIT/DGsIT

3. All Joint Secretaries/CsIT, CBDT

4. Commissioner of Income-tax (Media & TP) and official Spokesperson, CBDT, New Delhi

5. CIT, (CPC-TDS)

6. ADG (PR,P&P) for necessary action

7. JCIT, Database Cell, with a request to upload the order on the website irsofficersonline.gov.in

8. Web Manager, 0/o DGIT(Systems) with a request to upload the order on the website of incometaxindia.gov.in

9. The Institute of Chartered Accountants of India, IP Estate, New Delhi

10. A11 Chambers of Commerce

11. The Guard File

(Rubal Singh)
Deputy Secretary to the Government of India
ele: 23095462