The Income Tax Department (ITD) has brought significant relief to taxpayers and businesses by reducing Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) deductions. According to ITD, no action will be taken against taxpayers and businesses for the reduced TDS if they link their PAN with Aadhaar by May 31, 2024.

Impact of PAN-Aadhaar Linkage on TDS Cut

Under the rules of the Income Tax Department, failure to link PAN with Aadhaar results in a provision for doubled TDS deduction rates. However, the Central Board of Direct Taxes (CBDT) stated that they have received numerous complaints from taxpayers who received notices stating that they failed to deduct or collect TDS/TCS at lower rates during transactions where PANs were inactive.

CBDT’s Response and Relief Measures

In cases like these, the higher rate of deduction has not been enforced. Therefore, the Income Tax Department has demanded tax payment based on processing TDS/TCS statements. CBDT has mentioned that in cases where transactions were carried out until March 31, 2024, and where PAN has become operational due to linking with Aadhaar before May 31, 2024, taxpayers will not be liable to pay taxes at the higher rates.

Insights from Tax Experts

Tax partner at AKM Global, Sandeep Sahgal, noted that the circular has provided some relief to the taxpayers who had inactive PANs due to non-linkage with Aadhaar. He emphasized the importance of linking PAN with Aadhaar at the earliest in such cases. Various sources of income, including salary, investments, bank Fixed Deposits (FDs), and commissions, are subject to TDS deductions. TDS is the primary means through which the government collects taxes. The responsibility to deposit TDS into the government’s account lies with the person or company making the payment.