PAN-Aadhaar linking for TDS deduction: Deductee must verify the status on deduction date – here’s why | Business

TDS deduction: Tax Deducted at Source (TDS) plays an important role in the Indian tax system, ensuring that taxes are collected at the source of income itself. It’s important to not only deduct TDS at the specified rate but also to ensure the accurate deduction based on one’s PAN-Aadhaar linking status. Failing to do so can lead to higher TDS rates if the PAN is inoperative or inactive due to non-linkage with Aadhaar.
As per an ET report, the TDS deductor or collector may face legal consequences and tax penalties for failing to check the dedutee’s PAN status and deducting a lower TDS amount than required.
Mihir Tanna, associate director-direct tax at S.K Patodia LLP, was quoted as saying, “If the TDS deductor does not check the status of PAN of the deductee on the date of TDS deduction then all the penalty and other legal repercussions would be applied to him and nobody else. This is because it is the TDS deductor’s responsibility to check the status of PAN.”
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Why is it important to verify PAN status on the deduction date?

TDS deducted must be submitted to the government within 30 days from the end of the month in which it was deducted. However, there’s a chance that the PAN, which was inactive when TDS was deducted, may become active before the deadline for depositing the deducted amount with the government.
For instance, if TDS was deducted on March 20 and deposited on April 15, experts suggest that if the seller’s PAN was inactive on March 20 but became active by April 15, a higher TDS amount should have been deducted.
As further stated by Tanna, given the necessity of an active PAN, it’s important for every TDS payer to verify both the presence of a valid PAN and its operability on the deduction date. “Recently, many of our clients received notices for ‘short deduction of TDS’ from the Tax Department due to discrepancies in PAN-Aadhar linking status on the date of property sale payment versus the TDS payment date to the Government,” he said.

Which transactions require TDS deduction?

Certain transactions require TDS deduction or collection. According to Rahul Charkha, Partner at Economic Laws Practice (ELP), here are some instances when TDS is deducted or collected:
– Rent from house property exceeding Rs 50,000 per month.
– Sale of Immovable Property of Rs 50 lakh or more.
– Payment to Resident Contractors and Professionals exceeding specified limits.
– Salary payments.
– Expenditure on Foreign Remittance in specific cases.
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How can you check the status of a PAN?

To check the PAN status, individuals can visit the Income-tax department‘s website and select the ‘Verify PAN Status’ option from the ‘Quick Links’ section. This online tool enables users to verify PAN details by entering basic information like PAN, full name, date of birth, and other relevant details.

What happens if a taxpayer doesn’t deduct or collect the correct amount of TDS?

Failing to deduct the correct amount of TDS can result in severe consequences for individuals responsible for deduction or collection.
According to Charkha, this failure may prompt the tax department to impose additional interest, penalties, and even legal proceedings to ensure compliance. These outcomes underscore the significance of adhering diligently to TDS provisions, ensuring accurate deduction, and timely depositing of TDS to avoid financial liabilities, penalties, and legal repercussions.