Higher TDS due to PAN Holder's Negligence

CA Umesh Sharma , Last updated: 04 December 2023  

Arjuna (Fictional Character): Krishna, a lot of TDS Deductors who have filed their TDS returns for the 2nd quarter of FY 2023-24 have received intimations for Defaults in their TDS Return for Quarter 2nd. Why are the TAN holders getting these default notices from Income Tax Department?

Krishna (Fictional Character): Arjuna, many TAN holders have got TDS Default Notice on account of inoperative PAN status of the Deductees. As per the amendment to the rule 114AAA, the individuals who have not linked their PAN with their Aadhar, their PAN will stand inoperative w.e.f. 01st July 2023.

Consequently TDS in respect of these deductees will have to be deducted at higher rate as per  section 206AA read with Rule 114AAA(3)(iii) which could be @ 20% and TCS u/s 206CC read with Rule 114AAA(3)(iv).

Higher TDS due to PAN Holder s Negligence

However many TAN holders have not considered this amendment to the rule and have deducted TDS at normal rates. This has resulted in short deduction of TDS as per the department and consequently intimations have been sent to the TAN holders for revising their TDS returns and paying the difference amount due to short deduction.

Out of the 70 Crore PAN Holders in the country, still crores of individuals have not linked their PAN with their Aadhar and consequently an estimated 12 Crore PANs were deactivated by the Income Tax Authorities.

Arjuna (Fictional Character): Krishna, What if the deductee links his PAN with Aadhar after the filing of TDS return through payment of late fees?

Krishna (Fictional Character): Arjuna, even if the deductee has linked his PAN with his Aadhar subsequent of filing of TDS return, the TDS should have been deducted at higher rate i.e. 20% as PAN status on the date of deduction of TDS is to be checked for determination of rate of TDS.


Arjuna (Fictional Character): Krishna, how can the TDS deductor verify the PAN status of deductee?

Krishna (Fictional Character): Arjuna, The TDS deductor must login to TRACES website for verification of the PAN status. Under the dashboard tab the TAN holder will find a PAN Verification window in quick links provided. 


Arjuna (Fictional Character): Krishna, what should one learn from this?

Krishna (Fictional Character): Arjuna, the PAN holders were given numerous opportunities for linking their PAN with their Aadhar and clear instructions were given that after 30th June 2023, the PANs who are not linked with the Aadhar will stand inoperative. The higher rate of TDS is merely a consequence of such negligence by the PAN holders. However, this time the TAN holders are also made involved in this process by directing them to verify the PAN status of the deductees before deduction of TDS and to deduct TDS at higher rates if the PAN status is inoperative. Nevertheless, the taxpayers who have received intimation of such default in TDS returns are suggested to revise their returns at the earliest to avoid any further issues. In addition to this, the TAN holders must verify PAN status of all their deductees hereafter to avoid such defaults in future.

Published by

CA Umesh Sharma
Category Income Tax   Report

3 Likes   12605 Views


Related Articles