PAN-Aadhaar Not Linked? CBDT Offers Big Relief on Higher TDS/TCS—Here’s How You Can Avoid Penalty!

No Liability If PAN-Aadhaar Linked by Sept 30, 2025 or Within 2 Months of Payment Post Aug 1, 2025.

The Central Board of Direct Taxes (CBDT) has issued Circular No. 9/2025, partially modifying its earlier Circular No. 3 of 2023, to address widespread grievances regarding the consequences of Permanent Account Numbers (PANs) becoming inoperative under Rule 114AAA of the Income-tax Rules, 1962.

CBDT had earlier mandated that PANs not linked with Aadhaar would be rendered inoperative from July 1, 2023, with implications for higher Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) under Sections 206AA/206CC of the Income-tax Act, 1961.

However, many taxpayers and deductors raised concerns after receiving notices for ‘short deduction/collection’ of TDS/TCS in cases where PANs were inoperative at the time of transaction. These cases led to disputes during the processing of statements under sections 200A or 206CB of the Act.

Key Relief Measures Announced

In a bid to redress these concerns, CBDT has clarified that no liability shall arise on the deductor/collector for short deduction/collection in the following situations:

1. If the amount is paid or credited between 01.04.2024 and 31.07.2025, and the PAN is made operative (via Aadhaar linkage) on or before 30.09.2025.
2. If the amount is paid or credited on or after 01.08.2025, and the PAN is made operative within two monthsfrom the end of the month in which payment is made.

The circular reiterates that the provisions of Chapter XVII-B or XVII-BB of the Act will continue to apply as per law in all such cases.

Context and Previous Relief

Earlier, Circular No. 6 of 2024, dated 23.04.2024, had provided similar relief for transactions entered up to 31.03.2024 where PANs became operative on or before 31.05.2024. The current circular builds upon and extends that relief in light of ongoing grievances.

Circular Details

Circular No. 9/2025

Date: 21/07/2025

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Mariya Paliwala

Mariya is the Senior Editor at Juris Hour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.

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