In a major relief for taxpayers, the Central Board of Direct Taxes (CBDT) has extended the deadline for linking Aadhaar with PAN to September 30, 2025, specifically for avoiding penal consequences related to TDS and TCS short deductions or collections.
Through a partial modification of its earlier circulars, the CBDT has clarified that no penal liability will arise under Sections 206AA or 206CC of the Income Tax Act in cases where PANs were inoperative due to non-linkage with Aadhaar—provided they are made operative within the specified timeframe.
The updated relief framework applies under the following conditions:
- For amounts paid or credited between April 1, 2024, and July 31, 2025, no penalty will be imposed if the PAN is linked with Aadhaar and made operative by September 30, 2025.
- For amounts paid or credited on or after August 1, 2025, taxpayers will be exempt from penalty if the PAN is made operative within two months from the end of the month in which the payment is made.
Despite the relief, the department emphasized that TDS or TCS must still be deducted or collected in accordance with other applicable provisions of Chapter XVII-B or XVII-BB of the Income Tax Act once the PAN is reactivated.
The clarification comes in response to concerns raised over the issuance of notices for short deductions due to inoperative PANs, offering much-needed clarity and an extended compliance window for taxpayers.