Introduction:
As per the CBDT Circular No. 6/2024 dated 23.04.2024, several grievances have been received from taxpayers who are TDS/TCS deductors or collectors. They have received notices for short deduction/collection of TDS/TCS, where the PANs of the deductees/collectees were inoperative. In such cases, the deduction/collection has not been made at a higher rate, leading to demands raised by the Department against the deductors/collectors during the processing of TDS/TCS statements.
To address the grievances faced by deductors/collectors, the CBDT has provided relief from tax demand due to inoperative PAN, subject to the following conditions:
1. Transactions (which are subject to TDS or TCS) were entered into up to 31.03.2024, and
2. The deductee’s/collectee’s PAN should become operative (as a result of linkage with Aadhaar) on or before 31.05.2024.
If the above specified conditions are fulfilled, the Deductors/collectors will not be treated as defaulters for tax deducted at the normal rate for transactions conducted until March 31, 2024 and there shall be no liability on the deductor/collector on transactions up to 31.03.2024 to deduct/collect the tax at higher rates specified under section 206AA/206CC. As a result, the tax demand raised shall be removed from the portal.
Important note:
Extended date upto 31.05.2024 is for linkage of payee’s PAN with aadhar to give relief for transactions conducted upto 31.03.2024 only.
For transactions occurring on or after 01.04.2024, it is essential to ensure that the PAN of the deductee is linked to Aadhaar and remains valid on the date of deduction, if inoperative then the deductor/collector must deduct/collect tax at a higher rate under section 206AA/206CC.
Conclusion:
This circular represents a significant step taken by CBDT to address various grievances and to provide a relief to those Deductors or collectors who were required to deduct or collect tax at a higher rate due to inoperative PAN of payee but deducted or collected tax at a normal rate due to unawareness for transactions conducted upto 31.03.2024. They have an opportunity to ask payee to link PAN with Aadhaar before 31.05.2024 to avail benefit of extended date and reduce tax demand raised due to short deduction or collection of tax.
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Author Bio
We received the notice with justification that payee PAN is inoperative. But while filing Q4 returns the was made operative. No reply from department to for the resolution request raised. Please let me know what to do further.
You need to link the payee’s PAN with their Aadhaar card before 31.05.2024. If the demand is not removed automatically, then file a rectification request to modify the payee’s details and re-enter the payee’s PAN number.
What if Demand Notice is already received from the department towards Short Deductions?