The Central Board of Direct Taxes (CBDT) has issued a circular indicating that the higher rate of TDSITCS will not apply if the deductee or collectee is deceased before the PAN and Aadhaar are linked. CBDT issued a circular regarding this on August 5, 2024.
This move came after the department received many complaints from taxpayers citing instances of the deductee or collectee passing away within the specified time frame i.e., on or before May 31, 2024), before the possibility of linking PAN and Aadhaar being exercised.
Due to the deductor’s or collector’s inability to link the deceased person’s PAN and Aadhaar, tax requests are pending in these situations.
As per the rules, TDS will be deducted at the rate of 20% if they fail to link their PAN to Aadhaar. Similarly, TCS will be collected at a higher rate—5%—in accordance with Section 206CC’s rules.
“To address the concerns raised by the taxpayers, the Board hereby declares that in situations where a higher rate of TDS/TCS was applied for transactions completed up until March 31, 2024, as well as in cases where the deductor or collector passes away on or before May 31, 2024, i.e., prior to the possibility of linking PAN and Aadhaar, there will be no obligation on their part to deduct or collect the tax under will be applicable,” CBDT said.
According to the Central Board of Direct Taxes circular dated August 5, 2024, “In order to redress such grievances of the taxpayers, the Board, hereby specifies that in respect of cases where higher rate of TDS/TCS was attracted under section 206AA1206CC of the Act pertaining to the transactions entered into upto 31.03.2024 and in case of demise of the deductee/collectee on or before 31.05.2024 i.e. before the linkage of PAN and Aadhaar could have been done, there shall be no liability on the deductor/collector to deduct/ collect the tax under section 206AA1206CC, as the case maybe. The deduction/collection as mandated in other provisions of Chapter XVII-B or Chapter XVII-BB of the Act, shall be applicable.”
The last date to link PAN with Aadhaar was May 31, 2024, to avoid higher tax deducted at source (TDS) or tax collected at source (TCS).
The TDS is deducted at a higher rate when a deductee’s (whose tax has been deducted) PAN has not been linked with Aadhaar. A PAN that is not linked Aadhaar becomes an inoperative PAN.
How to link PAN with Aadhaar online through the e-filing website
Step 1: Visit Income Tax Site – https://www.incometax.gov.in/iec/foportal.
Step 2: Under ‘Quick Links’, click on ‘Link Aadhaar’. Provide the PAN, Aadhaar number, and name as
mentioned in the Aadhaar card
Step 3: Enter details such as PAN Number, Aadhaar number, your name on Aadhaar, and your mobile number, Tick the square if only the birth year is mentioned in the Aadhaar card, and also tick the box where you agree to get your Aadhaar details validated. Click on ‘Link Aadhaar’.
Step 4: Enter the Captcha code. The OTP will be sent to the registered mobile number and click the validate button.
Note that you can only link your Aadhaar and PAN after paying a Rs. 1,000 fine.
