Non Linking of PAN with Aadhar & TDS demand: CBDT Relaxation till 31st May 2024




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Non Linking of PAN with Aadhar & TDS demand: CBDT Relaxation till 31st May 2024

 

Query 1]

I have purchased a flat for Rs. 1.74 Cr from Mr. & Mrs. X & have paid the amount in 50:50 ratios after doing TDS @ 1%. The sale deed was executed in Dec-23 & I have deposited the amount TDS by filing return cum challan in Form No. 26QB in Dec-23 itself. Now, I have received the demand for 19% in respect of TDS payment of Mrs. X. In respect to the amount paid to Mr. X, no demand is raised. On enquiry, I come to know that the PAN of Mrs. X is not linked with Aadhar and so TDS was required @ 20% as against 1%. I have already paid the amount to both & nothing is payable as of now. Mrs. X is not paying the amount of 19%. In such a scenario, whether the demand notice from income tax department U/s 200A of 19% on me is right? Whether the income tax department can recover the amount directly from Mrs. X on the basis of proof of my payment through the banking channel? Is there any fault despite 1% TDS payment? What is the remedy with me? 

Opinion:

  1. Tax Deduction at Source (TDS) is required to be done by the taxpayers at a prescribed rate. Normally, the TDS rate is in the range of 0.10% to 10% depending upon the nature of payment, for example, Interest payment attracts TDS @ 10%, commission @5%, Purchase of goods exceeding Rs. 50 Lakh @ 0.10% and TDS on purchase of property exceeding Rs. 50 Lakh attracts TDS @ 1% & so on.
  2. The normal rate of TDS as discussed hereinabove is subject to a rider that the recipient has a valid & operative PAN and the same is furnished to the payer.
  3. In case the recipient (i.e., deductee) doesn’t have a operative PAN or didn’t furnish it to the deductor then the TDS is applicable at a higher rate which is normally 20% (5% in case payment is covered by section 194-O/194-Q). Further, such a person cannot furnish declaration in Form 15G/15H.
  4. Income tax Act categorically provides that, if the PAN provided to the deductor is invalid  or does not belong to the deductee then it shall be deemed that the deductee has not furnished his PAN & TDS shall be required to be done at a higher rate of 20% or 5%.
  5. One may recall that the income tax law has made linking of PAN with Aadhar and the last date for linking was 30th June 2023. Those PAN which has not been linked with Aadhar has now become inoperative/ invalid. As a result of this, payment to all the persons whose PAN is not linked with Aadhar will attract TDS at a higher rate of 20% or 5% and not at a regular rate of TDS.
  6. Taxpayers may note that the liability to do TDS triggers in the hands of the deductor (a) at the time of payment or (b) at the time of credit to the account of the payee, whichever is earlier. If on the date of making the payment/credit, the PAN of the deductee is invalid then the TDS will be required to be done at a higher rate of 20% or 5%. In short, the deductor has to do TDS at the rate as applicable at the time of payment/credit. The change in the status of the PAN from invalid to valid at subsequent dates will not change the liability which has already triggered at the time of payment/credit only.
    For example, M/s. X Ltd has paid interest of Rs. 1 Lakh to Mr. A on 01.01.2024.  The PAN of Mr. A was invalid on 01.01.2024 as it was not linked with Aadhar. Subsequently, Mr. A linked the PAN with Aadhar on 02.01.2024. In this case, since the liability of M/s. X Ltd has arisen on 01.01.2024, TDS is applicable at a higher rate of 20%. Even though the status of the PAN has changed from invalid to valid on the very next day, the deductor is not allowed to proceed with TDS at a lower rate.
  7. Similar to your case, lot of taxpayers and businessmen have got huge demand notices due to non-linking of PAN with Aadhar.
    Good news is that the CBDT has come out with some relaxation [vide circular No. 6/2024 Dated 23.04.2024] in case the deductor / payer who has done TDS in the FY 2023-24 at a regular rate and not at a higher rate due to non-linking of PAN with Aadhar. But for availing the benefit of the CBDT circular, you would be required to ensure that the PAN of Mrs. X is linked with Aadhar on or before 31.05.2024. If it is done so, the demand of 19% would stand nullified automatically in due course of time.

    Highlight of CBDT Circular No. 6/2024 Dated 23.04.2024:

  1. CBDT has provided relaxation only in respect of short deductions due to non-linking of PAN with Aadhar until 31stMarch 2024. If the transaction is done on or after 01.04.2024 then there will not be any relaxation to the deductor. In all such cases, the higher rate of TDS would be applicable.
  2. The benefit is applicable only if the TDS has been done by the deductor at a regular rate and not as per applicable higher rate. In case the deductor has done the TDS at an applicable higher rate during FY 2023-24 then they cannot revise the TDS return and refund the TDS amount to the deductor by taking the shelter of this new circular.
  3. This is a one-time measure to support the deductor whereby short deduction demand can be nullified if the payee/deductee links the PAN with Aadhar on or before 31.05.2024. Deductor may check the TDS traces site & may avail the benefit of above circular by requesting the deductee/payee to link the PAN with Aadhar on or before 31.05.2024.

Conclusion & Precautionary Measures

Now, every deductor before doing TDS needs to check whether the PAN of the payee is valid or not? The status of every PAN can be verified from income tax portal www.incometax.gov.in at “verify your PAN” menu or at following link- https://eportal.incometax.gov.in/iec/foservices/#/pre-login/verifyYourPAN

[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com.  Other articles & response to queries are available at www.theTAXtalk.com]

 

 

 

 




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