Indian government allows standard TDS rates for PAN-Aadhaar-linked individuals
What's the story
The Indian government has permitted deductors to apply standard Tax Deduction at Source (TDS) rates for individuals, who have linked their PAN with Aadhaar by May 31, 2024. This policy change aims to alleviate the burden on entities managing TDS and Tax Collected at Source (TCS) at ordinary rates. Previously, unlinked PANs were subject to a doubled TDS rate.
Penalty reprieve
Relief for deductors who have deducted less tax
The new policy provides a respite from penalties for deductors, who have deducted less tax due to an inactive PAN caused by non-linkage with Aadhaar. However, this relief is conditional and only comes into effect if the deductee links their PAN with Aadhaar, and makes it active again by the specified date. Consequently, deductors are no longer liable for the difference in income tax rates.
Deadline
Advice pertains to transactions done until March 31
This policy revision is a response to the numerous warnings issued to deductors, for tax deduction shortfalls due to inactive PANs. To avoid such issues, it's recommended for deductors to make sure that the PAN of the deductee is linked with Aadhaar, ideally by May 31. This advice pertains specifically to transactions carried out until March 31, 2024.