PAN-Aadhaar Not Linked? TDS Penalty Deadline Extended: What Happens Next?

The Income Tax Department recently announced an extension in the deadline for imposing penalties related to non-deduction of double TDS for taxpayers with unlinked PAN-Aadhaar. This decision comes as a relief to individuals and entities who were facing penalties for not deducting higher TDS due to the absence of a linked PAN-Aadhaar.

In a circular issued by the Central Board of Direct Taxes (CBDT), it was specified that no punitive action would be taken against deductees for short deduction of Tax Deducted at Source (TDS) if the assesses link their PAN-Aadhaar by May 31, 2024. This extension provides a grace period for taxpayers to ensure compliance with the PAN-Aadhaar linking requirement and avoid penalties.

Extension Explained

The extension primarily addresses the issue of double TDS deductions that arise when PAN is not linked with Aadhaar. As per income tax rules, non-linkage of PAN with Aadhaar requires TDS to be deducted at double the applicable rate. This rule has been in effect since June 30, 2023, when PANs of individuals who hadn’t linked their two ID proofs became inactive.

Burden Alleviated

Many taxpayers, especially deductors, have faced notices and demands from the Income Tax Department due to defaulting on TDS/TCS payments caused by inoperative PANs. The Central Board of Direct Taxes (CBDT) has received grievances from such taxpayers, leading to the decision to extend the deadline.

Expert Insights

Tax experts like Sandeep Sehgal from AKM Global have welcomed this move, highlighting the relief it brings to tax deductors burdened by notices and penalties. Sehgal advises prompt action to ensure PAN-Aadhaar linkage before the new deadline to avoid penalties.

Challenges and Solutions

While the extension provides relief, challenges remain, such as the lack of a utility to verify if a PAN is operative or not. Taxpayers are encouraged to use the provided link to check and link their PAN with Aadhaar to avoid compliance issues.

Link – https://eportal.incometax.gov.in/iec/foservices/#/pre-login/bl-link-aadhaar

PAN-Aadhaar Linking Process

Taxpayers can visit the Income Tax Department’s portal to link their PAN with Aadhaar before May 31, 2024. Failure to do so can lead to non-KYC compliance, restrictions on trading, and challenges in filing income tax returns.