CBDT Circular Provides Relief to TDS/TCS Deductors

INTRODUCTION

In a significant development, the Central Board of Direct Taxes (CBDT) has issued Circular No. 6 on 23rd April 2024, aiming to address the challenges faced by deductors/collectors regarding Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). This move by the CBDT comes as a relief measure for entities that inadvertently collected TDS/TCS at normal rates instead of the higher rates mandated due to PAN-Aadhaar linkage issues.

KEY HIGHLIGHTS OF THE CIRCULAR

• The Circular emphasizes that deductors/collectors should not treat TDS deductors as defaulters for transactions conducted up to 31st March 2024 if the PAN of the deductee is linked to Aadhaar by or before 31st May 2024.
• It absolves deductors/collectors from the liability to deduct/collect tax at double the rate under sections 206AA/206CC due to the inoperative PAN resulting from the non-linkage of PAN with Aadhaar.
• Consequently, deductors/collectors will not be obligated to pay the difference in tax rates, providing them with significant tax relief and alleviating undue hardships.

IMPLICATIONS AND BENEFITS

• The Circular offers a much-needed respite to deductors/collectors who inadvertently collected TDS/TCS at normal rates, sparing them from penalization for short deductions.
• By extending the deadline for PAN-Aadhaar linkage until 31st May 2024 for transactions until 31st March 2024, the CBDT aims to facilitate compliance while mitigating the financial burden on deductors/collectors.
• This initiative reflects the CBDT’s commitment to streamlining tax administration and alleviating compliance burdens on taxpayers, promoting ease of doing business and fostering a taxpayer-friendly environment.

CONCLUSION

The issuance of Circular No. 6 by the CBDT marks a proactive step towards addressing the challenges faced by TDS/TCS deductors/collectors and providing them with much-needed relief from undue hardships. This move underscores the government’s commitment to facilitating tax compliance and fostering a conducive environment for taxpayers. It is expected to streamline processes and promote greater transparency and efficiency in tax administration.