Taxpayers who link their Permanent Account Number (PAN) and Aadhar card by May 31, 2024, will not face any action for short deduction of TDS, the Income Tax Department said in a circular this week. The department has relaxed the deadline for people who failed to link their cards by the previous cut-off date of June 30, 2023, a huge relief for taxpayers.

As per the rules, individuals must link their PAN and Aadhaar cards, failing which will attract double the standard rate of TDS deduction. In its April 24 circular, the Central Board of Direct Taxes (CBDT) stated, “Several grievances have been received from taxpayers that they are in receipt of notices intimating that they have committed default of short-deduction of TDS/TCS while carrying out the transactions where the PANs of deductees were inoperative.”

CBDT added that for “transactions entered into up to March 31, 2024, and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before May 31, 2024, there shall be no liability on the deductor/collector to deduct/collect the tax (at a higher rate)”.

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This step will allow the department to address complaints made by such deductors/collectors regarding the short deduction of tax deducted at source (TDS).

Why Is Pan-Aadhaar Linking Important?

Failing to link your PAN with the Aadhaar card can result in consequences. Firstly, your PAN will become inoperative, blocking financial transactions and official dealings. Additionally, any pending tax refunds and the interest on those refunds will not be issued until the linking is complete. Moreover, there will be implications on TDS and tax collected at source (TCS). TDS will be deducted at a higher rate, potentially increasing individual tax liabilities. Similarly, TCS will be collected at a higher rate, affecting transactions subject to TCS provisions.

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How Do You Link PAN And Aadhaar Cards?

To link your PAN with Aadhaar, you can follow a few simple steps on the Income Tax Department website. Visit the website and select the ‘Link Aadhaar’ option under the ‘Quick Links’ section. Then, input your PAN and Aadhaar numbers and validate them by clicking the appropriate button. You’ll be required to enter your name, as per your Aadhaar card and provide your mobile phone number. After inputting these details, click the ‘Link Aadhaar’ button. Finally, you’ll receive an OTP on your registered mobile number, which you must enter and validate to complete the linking process. This step will ensure compliance with the income tax regulations and help avoid the consequences mentioned above for non-compliance.