In a fresh reminder to taxpayers, the Income Tax Department has asked them to link their PAN with Aadhaar by May 31, if not done already, to avoid higher TDS (tax deducted at source) payment.

The tax department in a social media post said “Kind Attention Taxpayers, Please link your PAN with Aadhaar before May 31st, 2024, if you haven’t already, in order to avoid tax deduction at a higher rate.Please refer to CBDT Circular No.6/2024 dtd 23rd April, 2024.

“Linking your PAN with your Aadhaar by May 31 ensures you don’t face higher tax deduction/ tax collection under Section 206AA and 206CC of the Income Tax Act, 1961, due to an inoperative PAN for the transactions entered into before March 31, 2024,” the I-T Department said on social media platform ‘X’.

According to the CBDT circular dated April 23, 2024, “With a view to redressing the grievances faced by such deductors/collectors, the Board, in partial modification and in continuation of the Circular No. 03 of 2023, hereby specifies that for the transactions entered into up to 31.03.2024 and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31.05.2024, there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC, as the case maybe, and the deduction/collection as mandated in other provisions of Chapter XVII-B or Chapter XVII-BB of the Act, shall be applicable.”

So, the deductees (whose tax has been deducted) need to link their PAN and Aadhaar by May 31, 2024, so the deductor (who has deducted the tax) is not liable to pay a penalty for not deducting higher TDS.

In Circular No. 6/2024, which was released on April 23, 2024, the Central Board of Direct Taxes (CBDT) explained the rules and the consequences of non-linking of PAN with Aadhaar.

Who needs to link Aadhaar and PAN?

Section 139AA of the Income Tax Act provides that every individual who has been allotted a permanent account number (PAN) as on the 1st day of July, 2017, and who is eligible to obtain an Aadhaar number, shall intimate his Aadhaar number in the prescribed form and manner. Your PAN will become inoperative if you do not link it with Aadhaar till 30th June 2023. However, people who fall under the exempted category will not be subject to the effects of PAN becoming inoperative.

What will happen if you don’t link Aadhaar and PAN?

Your PAN will become inoperative if you do not link it with Aadhaar… and shall face the following consequences as a result of PAN becoming inoperative:

  1. Refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made to him;
  2. Interest shall not be payable to him on such refund for the period, beginning with the date specified under sub-rule (4) of rule 114AAA and ending with the date on which it becomes operative;
  3. Where tax is deductible under Chapter XVJJ-B in case of such person, such tax shall be deducted at higher rate, in accordance with the provisions of section 206AA;
  4. Where tax is collectible at source under Chapter XVJJ-BB in case of such person, such tax shall be collected at higher rate, in accordance with the provisions of section 206CC.