Higher TDS due to PAN Holder’s Negligence
Introduction: In this fictional dialogue between Arjuna and Krishna, the spotlight is on TDS default notices for the 2nd quarter of FY 2023-24. The crux of the matter revolves around the inoperative PAN status of deductees, resulting in escalated TDS deductions and subsequent notifications to TAN holders. Let’s unravel the intricacies.
Arjuna (Fictional Character): Krishna, the 2nd quarter of FY 2023-24 has brought forth a slew of issues for TDS Deductors. Notices for Defaults in TDS Returns are inundating them. What’s causing this chaos?
Krishna (Fictional Character): Arjuna, indeed, many TAN holders find themselves entangled in TDS Default Notices, and the root cause lies in the inoperative PAN status of Deductees. There’s been an amendment to Rule 114AAA that has stirred the waters. PANs unlinked with Aadhar since July 1, 2023, are now deemed inoperative.
This shift comes with consequences—TDS for these deductees is subject to a higher rate, potentially 20%, as per section 206AA read with Rule 114AAA(3)(iii). Unfortunately, a significant number of TAN holders failed to acknowledge this amendment. They continued deducting TDS at normal rates, resulting in short deductions. Consequently, the Income Tax Department is dispatching intimations, urging TAN holders to revise their returns and rectify the shortfall.
Arjuna (Fictional Character): Krishna, why are PAN holders grappling with this issue?
Krishna (Fictional Character): Arjuna, out of the 70 Crore PAN Holders in the country, a staggering number have neglected to link their PAN with Aadhar. The consequence? An estimated 12 Crore PANs were deactivated by the Income Tax Authorities.
Arjuna (Fictional Character): Krishna, what if a deductee links PAN with Aadhar after filing TDS returns through late fees?
Krishna (Fictional Character): Even if the deductee links PAN with Aadhar post filing, the TDS should have been deducted at the higher rate of 20%. The determining factor is the PAN status during the deduction date.
Arjuna (Fictional Character): Krishna, how can TDS deductors verify the PAN status of deductees?
Krishna (Fictional Character): Arjuna, TDS deductors can navigate to the TRACES website for PAN status verification. A PAN Verification window is conveniently located under the dashboard tab’s quick links.
Arjuna (Fictional Character): Krishna, what lesson can we draw from this situation?
Krishna (Fictional Character): Arjuna, this situation reveals the consequences of negligence on the part of PAN holders. They were given ample opportunities to link their PAN with Aadhar, with clear instructions that unlinked PANs would become inoperative after 30th June 2023. The higher TDS rate is merely a consequence of this negligence.
Interestingly, TAN holders are now intricately involved in this process. They play a pivotal role in verifying the PAN status of deductees before deduction. This adds a layer of responsibility for TAN holders in ensuring compliance and avoiding defaults.
For those taxpayers who have received intimation of default in TDS returns, the suggested course of action is to promptly revise their returns. This proactive step can help sidestep further complications. Additionally, TAN holders must take this as a wake-up call and diligently verify the PAN status of all their deductees to prevent similar defaults in the future.
Conclusion: The intricate dance of higher TDS defaults due to PAN negligence unfolds the repercussions of neglecting Aadhar linkage. TAN holders shoulder a pivotal role in upholding compliance, underscoring the need for PAN status verification before deductions. Immediate action for those with default intimations is recommended, while ongoing vigilance in PAN-Aadhar linkage is essential for seamless compliance in the future.
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