Tds provisions
This query is : Resolved
27 December 2014
Whether there is any remedy from 20% short deduction of tds in case of pan error for more than 2 digits in case of salaried employee.
Guest
Guest
(Expert)
27 December 2014
Hope this would be helpful
Your query related to PAN error default is acknowledged. It is to inform you that the provisions of section 206AA apply at the time of tax deduction, which happens prior to the filing of statement. Thus, the deductor is expected to have a Valid PAN at the time of deduction. Only a typographical error is expected at the time of filing the TDS statement. The demand in the hands of the deductors is being rectified in cases where the difference between the Invalid PAN and the Valid PAN is not more than 2 characters. This is being done in order to take care of the genuine typographical errors in data entry. The rectification of demand in other cases is not done if the mismatch is more than two alpha characters & two numerics. Therefore, out of 10 characters in case of structurally valid PAN, 4 characters are being considered for rectification of demand. Regards, Team TDS CPC - See more at: https://taxguru.in/income-tax/rectification-tds-statement-pan-error-2-characters.html#sthash.Taw3rYsu.dpuf
Your query related to PAN error default is acknowledged. It is to inform you that the provisions of section 206AA apply at the time of tax deduction, which happens prior to the filing of statement. Thus, the deductor is expected to have a Valid PAN at the time of deduction. Only a typographical error is expected at the time of filing the TDS statement. The demand in the hands of the deductors is being rectified in cases where the difference between the Invalid PAN and the Valid PAN is not more than 2 characters. This is being done in order to take care of the genuine typographical errors in data entry. The rectification of demand in other cases is not done if the mismatch is more than two alpha characters & two numerics. Therefore, out of 10 characters in case of structurally valid PAN, 4 characters are being considered for rectification of demand. Regards, Team TDS CPC - See more at: https://taxguru.in/income-tax/rectification-tds-statement-pan-error-2-characters.html#sthash.Taw3rYsu.dpuf
27 December 2014
But such demand for 20% tds is arise after correction of tds return for the f.y. 2011-12 on 25th dec 2014. Before correction wrong 10 characteres of PAN was entered in tds return but no such demand arise.
why only after correction demand arised, is there any remedy against levy of such penalty.
why only after correction demand arised, is there any remedy against levy of such penalty.
27 July 2025
This is a common and tricky issue related to **TDS deduction under Section 206AA** due to PAN errors. Here's a detailed explanation addressing your concerns:
---
### Issue Summary:
* **Incorrect PAN (more than 2 character mismatch)** was originally reported in TDS Return for FY 2011-12.
* No demand was raised initially.
* After **filing revised TDS return with corrected PAN on 25th Dec 2014**, a demand for **TDS @ 20%** was raised.
* You want to know if there is any remedy against this demand or penalty.
---
### Why did demand arise only after revised return?
* When incorrect PAN is reported, the system does not automatically treat it as a valid PAN.
* Initially, since PAN was wrong, no credit may have been allocated properly.
* On **correction**, the system tries to reconcile data and apply the provisions of **Section 206AA**, which mandates TDS deduction at higher rate (20%) if PAN is invalid or missing.
* This results in a demand for the **shortfall TDS** at 20% on the amount paid.
* Hence, after revising the return with corrected PAN, the system identifies the short deduction (because earlier the deduction may have been at lower rate) and raises the demand.
---
### Remedies Available:
1. **Rectification / Grievance with TDS CPC:**
* You can write to TDS CPC explaining that the original TDS was deducted correctly but the error arose due to PAN mismatch.
* Cite that the PAN mismatch was genuine and unintentional.
* Request them to waive or reduce the demand based on bona fide error.
2. **File a Revised Return with Correct PAN:**
* Since you already filed the revised return, ensure all details are accurate and supported by documentation.
3. **File an Appeal:**
* If demand persists, you can file an appeal with the **Assessing Officer** under the Income Tax Act challenging the demand.
* Argue that TDS was deducted correctly as per information available and PAN error was genuine.
4. **Avoid Future Issues:**
* Always verify PAN before deducting TDS.
* Keep communication records with deductees about PAN details.
---
### Important Notes:
* **No automatic waiver:** The Income Tax Department usually insists on 20% TDS when PAN is invalid as per Section 206AA.
* **Penalty vs Demand:** The demand is for shortfall TDS; penalty is a separate issue and can be contested.
* Genuine mistakes sometimes get relief via representations or appeals.
---
If you want, I can help draft a representation letter or guide you on appeal procedures. Would that help?
---
### Issue Summary:
* **Incorrect PAN (more than 2 character mismatch)** was originally reported in TDS Return for FY 2011-12.
* No demand was raised initially.
* After **filing revised TDS return with corrected PAN on 25th Dec 2014**, a demand for **TDS @ 20%** was raised.
* You want to know if there is any remedy against this demand or penalty.
---
### Why did demand arise only after revised return?
* When incorrect PAN is reported, the system does not automatically treat it as a valid PAN.
* Initially, since PAN was wrong, no credit may have been allocated properly.
* On **correction**, the system tries to reconcile data and apply the provisions of **Section 206AA**, which mandates TDS deduction at higher rate (20%) if PAN is invalid or missing.
* This results in a demand for the **shortfall TDS** at 20% on the amount paid.
* Hence, after revising the return with corrected PAN, the system identifies the short deduction (because earlier the deduction may have been at lower rate) and raises the demand.
---
### Remedies Available:
1. **Rectification / Grievance with TDS CPC:**
* You can write to TDS CPC explaining that the original TDS was deducted correctly but the error arose due to PAN mismatch.
* Cite that the PAN mismatch was genuine and unintentional.
* Request them to waive or reduce the demand based on bona fide error.
2. **File a Revised Return with Correct PAN:**
* Since you already filed the revised return, ensure all details are accurate and supported by documentation.
3. **File an Appeal:**
* If demand persists, you can file an appeal with the **Assessing Officer** under the Income Tax Act challenging the demand.
* Argue that TDS was deducted correctly as per information available and PAN error was genuine.
4. **Avoid Future Issues:**
* Always verify PAN before deducting TDS.
* Keep communication records with deductees about PAN details.
---
### Important Notes:
* **No automatic waiver:** The Income Tax Department usually insists on 20% TDS when PAN is invalid as per Section 206AA.
* **Penalty vs Demand:** The demand is for shortfall TDS; penalty is a separate issue and can be contested.
* Genuine mistakes sometimes get relief via representations or appeals.
---
If you want, I can help draft a representation letter or guide you on appeal procedures. Would that help?
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