Tax Relief for Aadhaar-PAN Linkage: Income Tax Department Eases TDS Deduction Rules

"Tax Relief 
 for Aadhaar-PAN Linkage: Income Tax Department Eases TDS Deduction Rules"

In a significant move aimed at providing relief to taxpayers and businesses, the Income Tax Department has announced a relaxation in Tax Deducted at Source (TDS) deduction regulations. Effective until May 31, 2024, taxpayers who link their Permanent Account Number (PAN) with Aadhaar will be spared from punitive actions for any shortfall in TDS deductions.

Under existing regulations, failure to link PAN with Aadhaar could result in TDS being deducted at double the standard rate. However, acknowledging the challenges faced by taxpayers in this regard, the Central Board of Direct Taxes (CBDT) has responded to numerous grievances by waiving penalties for under-deduction or collection of TDS/TCS, provided PAN-Aadhaar linkage is completed by the stipulated deadline.

Sandeep Sehgal, a tax partner at AKM Global, emphasized the importance of promptly linking PAN with Aadhaar, particularly for cases where PAN had become inactive due to non-compliance. This circular offers a respite to tax deductors, ensuring that taxpayers are not burdened with higher tax rates owing to administrative oversights.

TDS deductions are applicable across various income streams, encompassing salaries, investments, bank Fixed Deposits (FDs), and commissions. As the government relies on TDS for tax revenue, it underscores the responsibility of entities making payments to ensure timely and accurate deductions.

This development underscores the government's commitment to easing compliance burdens and fostering a taxpayer-friendly environment. Taxpayers are urged to take advantage of this opportunity by ensuring timely Aadhaar-PAN linkage, thereby avoiding potential penalties and contributing to a smoother tax administration process.