Circular No. 6/2024 dated 23 April 2023
In a significant update, the Central Board of Direct Taxes (CBDT) has issued Circular No. 6/2024 dated April 23, 2024, stating that deductors/collectors won’t be held liable for short deductions/collections of tax until March 31, 2024, if the PAN becomes inactive by May 31, 2024. This exemption applies to transactions conducted until March 31, 2024, and if the PAN becomes operational by May 31, 2024, following default in Aadhaar linkage.
Previously, Circular No. 3 of 2023 explained the consequences of PAN becoming inactive. Taxpayers failing to provide their Aadhaar number faced several repercussions, including the denial of tax refunds and the imposition of higher tax deduction/collection rates under sections 206AA and 206CC of the Income-tax Act, 1961.
Taxpayers have raised concerns about receiving notices for defaulting on TDS/TCS deductions due to inactive PANs of recipients. Despite no higher deductions being made, the tax department has demanded payments from deductors/collectors during TDS/TCS statement processing under sections 200A or 206CB.
To address these grievances, the CBDT has partially modified Circular No. 3 of 2023. Now, for transactions until March 31, 2024, and if the PAN becomes active by May 31, 2024, no liability exists for deducting/collecting tax under sections 206A/206C. Instead, deductions/collections mandated by other provisions of Chapter XVII-B or XVII-BB of the Act will apply.
This move aims to alleviate the challenges faced by deductors/collectors and ensure compliance with tax regulations while providing relief from undue liabilities.
To Access the Circular 6/2024 CLICK HERE
To Access the CBDT Notification 39/2024 CLICK HERE
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