TDS @ 20% in case PAN not linked with Aadhar.- Verify & deduct.

 TDS deductors receiving notices for not deducting TDS at 20% in case of payee not linking PAN with Aadhar:

 

·       Of late, assessees have received notices from Income Tax (TDS) department for not deducting TDS of payee having inoperative PANs at the rate of 20%. This is because the payee has missed linking PAN with his Aadhar.

 

·       As per Section 139AA of the Income-tax Act,1961 (‘the Act’) that every person who has been allotted a Permanent Account Number (‘PAN’) shall also be required to link the same with his Aadhaar. 

 

·       If the PAN is not linked with Aadhaar by 30th June 2023, it shall become inoperative immediately.    

 

·       Rule 114AAA of the Income-tax Rules (‘the Rules’) provides that in case of a person whose PAN has become inoperative, it shall be deemed that he has not furnished, intimated or quoted the PAN at all, and he shall be liable for all the consequences under the Act for not furnishing, intimating or quoting the PAN.

 

·       However, the person can make his PAN operative again by linking his Aadhaar and the PAN shall be operative from the date of intimation of Aadhaar.

 

·       As per the provisions of Section 206AA of the Act, where a payee fails to furnish his PAN to the deductor, tax shall be deducted at a higher rate of:

 

· rate specified in the relevant provision of the Act or

· at the rates in force or

· at the rate of 20%

 

Now, strictly going by the provisions of Rule 114AAA, TDS will indeed have to be deducted at 20% even if the payee later on links his PAN with Aadhar to make it operative.