REGARDING HIGHER TDS UNDER 206AA
This query is : Resolved
31 May 2024
If an employee has total salary of less than 7 lakh under new tax regime
Therefore employer is not liable to deduct TDS and filed annual 24Q declaring total salary of employee for Q4,
Now if adhar and PAN card of emplyee are not linked then provision for higher TDS deduction would be applicable if no TDS is liable to paid in original return?
Therefore employer is not liable to deduct TDS and filed annual 24Q declaring total salary of employee for Q4,
Now if adhar and PAN card of emplyee are not linked then provision for higher TDS deduction would be applicable if no TDS is liable to paid in original return?
31 May 2024
first of all tds has to attract in the case..higher rate or not comes second...in this case no tds deduction is applicable
15 August 2025
1. Mandatory Higher Rate:
If PAN is not provided or is invalid/inoperative, TDS must be at the highest of: (a) rate under the Act, (b) prevailing rate, or (c) 20% flat
Saral Pro
ClearTax
.
2. Non-Residents & DTAA Benefit:
Section 206AA cannot override DTAA benefits. If DTAA offers a lower rate, that may be applied even if PAN isn't furnished—backed by Supreme Court and ITAT precedents
TaxTMI
.
3. Salary TDS Must Follow Section 192:
Higher TDS rate should not override salary-specific computation under Section 192. Tribunal rulings have held that employees should be taxed based on usual salary rules—not at a flat 20%
KPMG Assets
.
4. Relief via CBDT Circular No. 9/2025:
If PAN was inoperative due to Aadhaar linkage but later made operative within the specified window, higher TDS need not apply:
Payments from 1 Apr 2024 to 31 Jul 2025: PAN regularisation by 30 Sep 2025 gives relief.
Payments from 1 Aug 2025 onward: Must regularise within 2 months from the month of payment to avoid penalty
CAclubindia
.
Recommended Action Plan:
Validate PAN operability (via TRACES or portal tools) before TDS remittance.
For non-residents, assess DTAA treaty applicability.
For salary payouts, follow Section 192 methodology even if PAN is absent or invalid.
If faced with default notices due to inoperative PAN, file corrections citing Circular 9/2025 and request refund or rectification in TRACES.
If PAN is not provided or is invalid/inoperative, TDS must be at the highest of: (a) rate under the Act, (b) prevailing rate, or (c) 20% flat
Saral Pro
ClearTax
.
2. Non-Residents & DTAA Benefit:
Section 206AA cannot override DTAA benefits. If DTAA offers a lower rate, that may be applied even if PAN isn't furnished—backed by Supreme Court and ITAT precedents
TaxTMI
.
3. Salary TDS Must Follow Section 192:
Higher TDS rate should not override salary-specific computation under Section 192. Tribunal rulings have held that employees should be taxed based on usual salary rules—not at a flat 20%
KPMG Assets
.
4. Relief via CBDT Circular No. 9/2025:
If PAN was inoperative due to Aadhaar linkage but later made operative within the specified window, higher TDS need not apply:
Payments from 1 Apr 2024 to 31 Jul 2025: PAN regularisation by 30 Sep 2025 gives relief.
Payments from 1 Aug 2025 onward: Must regularise within 2 months from the month of payment to avoid penalty
CAclubindia
.
Recommended Action Plan:
Validate PAN operability (via TRACES or portal tools) before TDS remittance.
For non-residents, assess DTAA treaty applicability.
For salary payouts, follow Section 192 methodology even if PAN is absent or invalid.
If faced with default notices due to inoperative PAN, file corrections citing Circular 9/2025 and request refund or rectification in TRACES.
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