CBDT Rollbacks Higher TDS/TCS Rates for Inoperative PANs—Relief on Aadhaar Linkage !!
As part of its ongoing efforts to address taxpayer concerns, the CBDT has issued Circular No. 9/2025 (dated July 21, 2025), introducing substantial relief for deductors and collectors who faced demands due to inoperative PANs—typically resulting from delays in PAN‑Aadhaar linkage. For understanding the intricacies of deduction/ collection of Tax at higher rates, we need to refer the earlier versions of CBDT circular & notifications, which are as under:
1.CBDT Notification No. 11/2020, dated 13-02-2020
CBDT notified Income Tax Rule 114AAA prescribing that Permanent account number (PAN) will become inoperative if a person, who has been allotted PAN as on the 1st day of July, 2017 has failed to intimate his Aadhaar number under section 139AA(2) on or before the 31st day of March, 2020, the PAN of such person shall become inoperative immediately after the said date for the purposes of furnishing, intimating or quoting under the Income Tax Act.
Consequences of Not-Linking PAN with Aadhaar applicable from 01.04.2023 CBDT vide its order CBDT Order No. F.No.370142/14/2022-lPL Dated: 30/03/2022 Notifies 1st day of April, 2023, as the specified date for the purpose of the proviso to sub-rule (2) of rule 114AAA of the Income-tax Rules, 1962. That is, whose permanent account number (PAN) has become inoperative due to non-linking with Aadhaar under sub-rule (1) of Rule 114AAA, it shall be deemed that he has not furnished, intimated or quoted the permanent account number, as the case may be, in accordance with the provisions of the Act, and he shall be liable for all the consequences under the Act for not furnishing, intimating or quoting the permanent account number.
2. CBDT Circular No. 3/2023 dated 28.03.2023
CBDT has clarified the following consequences of failure to link PAN with the Aadhaar in accordance with the new substituted Rule 114AAA shall take effect from 1st July 2023 and shall remain in force till the PAN becomes operative:
i. Refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made to him;
ii. Interest shall not be payable to him on such refund for the period, beginning with the date specified under rule 114AAA(4) and ending with the date on which it becomes operative;
iii. 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;
iv. 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.
3. CBDT Circular No. 06/2024 dated 23.04.2024
After the earlier issued Circular No. 3 of 2023 dated 28.03.2023, lot of representations and grievances were received by the Board. Therefore, with a view to addressing the difficulty faced by such tax deductors/collectors, CBDT, in partial modification and in continuation of Circular No. 3 of 2023, 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 at higher rates and the deduction/collection as mandated in relevant provisions shall be applicable.
4. The Present- New Circular: CBDT Circular No. 9/2025 Dated: 21st July, 2025
Since the relief was granted till the transactions entered upto 31.03.2024 vide CBDT Circular No. 06/2024, this has again led to representations and grievances from various Tax deductors/ collectors who have frequently received (system generated) numerous notices for “short deduction/collection’’ of Tax, in case any transaction is entered upon with Persons having inoperative PANs, resulting in several Income Tax demands.
Redressing such grievances and representations, 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 the relevant provisions of the Act, will be applicable.
Conclusion
The Central Board of Direct Taxes (CBDT) has responded effectively to taxpayer grievances by issuing Circular No. 9/2025 (dated July 21, 2025), which extends critical relief for deductors and collectors facing TDS/TCS demands due to inoperative PANs
| Period | Relief Condition | Outcome |
| April 1’2024- July 31’2025 | PAN linked with Aadhaar by September 30, 2025 | Standard TDS/TCS rates apply—No higher Rates |
| From August 1’2025 onwards | PAN linked within 2 months of month-end of payment/credit | Same relief |
This New Circular dated 21st July 2025 provides much-needed relief and leniency, ensuring that those who acted in good faith aren’t penalized for inadvertent PAN inoperativeness, provided timely Aadhaar linkage is completed. It reinforces the principle that procedural technicalities should not override substantive compliance.
Moving forward, it’s crucial for deductors/collectors to adopt proactive due diligence—verifying PAN-Aadhaar linkage before transactions—and to track linkage timelines post-payment. This approach will ensure eligibility for relief and avoid unexpected notices or demands. Ultimately, Circular 9/2025 marks an intelligent calibration of tax administration, promoting fairness without compromising enforcement.
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