The Central Board of Direct Taxes (CBDT) has issued
Circular No. 9/2025 on July 21, 2025,
offering relief to taxpayers and deductors from higher
TDS/TCS deductions due to inoperative PANs not linked with Aadhaar.
As per Rule 114AAA of the Income-tax Rules, 1962,
PANs become inoperative if not linked with Aadhaar, which triggers
higher TDS under Section 206AA and
TCS under Section 206CC.
This led to multiple short-deduction and short-collection notices to deductors and collectors.
*Key Updates from CBDT*
- No Higher TDS/TCS Liability:
– For payments/credits from April 1, 2024, to July 31, 2025,
higher TDS/TCS will not apply if the PAN becomes operative by September 30, 2025.
– For transactions on or after August 1, 2025,
higher TDS/TCS will not apply if the PAN becomes operative within
2 months from the end of the payment month. - Relief for Deductors and Collectors:
No additional demand for short deduction or collection will be raised if PAN is linked within the prescribed time.
Regular rates under Chapter XVII-B and XVII-BB will apply instead of the 20% penal rate. - Background:
PANs not linked to Aadhaar became inoperative from July 1, 2023,
attracting higher TDS/TCS. Earlier relief under Circular 6/2024
was valid till May 31, 2024; this new circular extends the relief window.
*TDS/TCS Deduction Comparison*
| Situation | TDS/TCS Rate |
|---|---|
| PAN linked with Aadhaar (Active) | As per normal rates (5% / 10% / 20% based on section) |
| PAN not linked (Inoperative) | 20% (Higher Rate under 206AA / 206CC) |
| PAN made operative within CBDT relief period | Normal rates, no penalty for short deduction |
Note: Deductors must ensure PANs are linked within the specified time
to avoid future penal TDS/TCS rates.
to avoid future penal TDS/TCS rates.
This move by CBDT is expected to reduce disputes,
avoid unnecessary penal deductions, and
encourage timely PAN-Aadhaar linking.
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