TDS Regarding Inoperative PAN

This query is : Resolved

Nitin Khaire (Querist)
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06 February 2024 We have deducted TDS 194C@1% of Individuals and filed TDS return but due to inoperative PAN department has raised notice to deduct 20% TDS. Now we have linked PAN with Aadhar then how we can reduce TDS liability?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 If you have received a notice from the Income Tax Department stating that TDS should be deducted at a higher rate (20%) due to an inoperative PAN, and you have subsequently linked the PAN with Aadhaar, here’s how you can address the situation and potentially reduce the TDS liability:

### Steps to Reduce TDS Liability:

1. **Update PAN Details:**
- After linking PAN with Aadhaar, ensure that the updated PAN details reflect correctly in your records and on the Income Tax Department's portal.

2. **File Correction Statement (TDS Return):**
- File a correction statement (revised TDS return) to update the PAN details for the affected individuals for whom TDS was deducted at a higher rate (20%).
- Include the corrected PAN details and ensure all other relevant information is accurate.

3. **Rectification Request:**
- Submit a rectification request online through the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal for the TDS returns where 20% TDS was deducted.
- Select the appropriate reason for rectification as "PAN now available" or similar option.

4. **Provide Supporting Documents:**
- Attach supporting documents such as the updated PAN card copy, acknowledgment of PAN-Aadhaar linkage, and any communication received from the Income Tax Department regarding the linkage.

5. **Follow-up and Monitor:**
- Monitor the status of your rectification request on the TRACES portal regularly.
- If necessary, follow up with the Income Tax Department or CPC (Centralized Processing Center) for updates on the rectification process.

6. **Refund of Excess TDS (if applicable):**
- If excess TDS has been deducted at the higher rate (20%) due to the inoperative PAN and now corrected, you may be eligible for a refund of the excess amount.
- The refund will be processed by the Income Tax Department after the rectification is processed and verified.

### Additional Considerations:

- **Timely Action:** Ensure that the rectification request and correction statement are filed promptly after updating the PAN details with Aadhaar.
- **Documentation:** Keep all relevant documents and records of communication with the Income Tax Department for future reference.
- **Professional Advice:** If you encounter challenges or need assistance navigating the process, consider seeking guidance from a tax consultant or chartered accountant.

By following these steps and ensuring compliance with the Income Tax Department’s guidelines, you should be able to rectify the TDS liability issue and potentially receive a refund of any excess TDS deducted at the higher rate.