A fresh circular no.9/2025 has been issued by the Central Board of Direct Taxes (CBDT), altering the earlier norms on the outcomes of Permanent Account Number (PAN) becoming inoperative under Rule 114AAA of the Income-tax Rules, 1962.
The tax deductors and collectors who are facing the notices for the short deduction or collection of TDS/TCS are furnished with relief from the same move.
The Case
According to Circular No. 3 of 2023, the unlinked PANs with Aadhaar became inoperative from July 1, 2023, attracting higher TDS/TCS rates under Sections 206AA and 206CC of the Income-tax Act, 1961. Through Circular No. 6 of 2024, relief was later furnished for transactions till March 31, 2024, where PANs were made operative on or before May 31, 2024.
Taxpayers have been expressing concerns about receiving notices for defaults associated with lower TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) deductions. These issues typically arise when the Permanent Account Number (PAN) of the deductee or collectee was not operative at the time the transaction occurred.
Major Relief Measures Announced Via Circular No.9/2025
To tackle these concerns, the Central Board of Direct Taxes (CBDT) has clarified that deductors and collectors will not be held responsible for increased Tax Deduction at Source (TDS) or Tax Collection at Source (TCS) rates under Sections 206AA and 206CC in certain circumstances.
Between April 1, 2024, and July 31, 2025, the transactions of payments or credits where PAN is made operative (through Aadhaar linkage) on or before September 30, 2025.
Towards the payments or credits made on or after August 1, 2025, where the PAN is made operative within 2 months from the end of the month in which the transaction happened.
In these instances, the standard rules for Tax Deduction at Source (TDS) and Tax Collected at Source (TCS), as outlined in other sections of Chapter XVII-B and XVII-BB of the Income Tax Act, will still be applicable.
The motive of the move is to lessen the hardship to compliant deductors/collectors and facilitate TDS/TCS administration during the ongoing PAN-Aadhaar linkage enforcement.
Read Circular No.9/2025
