Thursday, November 16, 2023

Higher TDS On Inoperative PANs


In the process of filing Quarter 2 TDS/TCS statements for the FY 2023-24, it is crucial for deductors or collectors, including Central and State Government Offices, Local Authorities, Companies, Financial Institutions, Insurance Companies, Educational Institutions, etc., to pay attention to the compliance requirements related to Individual Inoperative PANs. Failing to comply may result in higher TDS or TCS rates.

Verifying PAN Status: The PAN status can be checked by visiting the Income-Tax Reporting Portal at This step is essential to avoid penalties and defaults.

Consequences of Inoperative PAN:

  1. Pending refunds will not be issued.
  2. Interest on refunds shall not be payable from 1.7.2023.
  3. TDS will be deducted at a higher rate.
  4. TCS will be collected at a higher rate.
  5. FORM 15G or 15H will not be valid.
  6. Difficulty in financial transactions at various institutions as PAN is a crucial KYC criterion.

Linking PAN-Aadhaar: Those who have not linked their PAN with Aadhaar should do so promptly to escape these consequences. The linking process involves a fee of Rs.1,000, payable through the e-Pay Tax functionality on the Income Tax portal. However, certain exemptions apply to non-residents, individuals aged eighty or more, and non-citizens of India.

Checking PAN Validity: To check if your PAN is valid or invalid, follow these steps:

  1. Go to the Income Tax e-filing website.
  2. Click the ‘Verify Your PAN’ option under the ‘Quick Links’ heading.
  3. Enter PAN, name, date of birth, and mobile number.
  4. Enter the OTP sent to your mobile number.

Financial Transactions Impacted by Inoperative PAN: An inoperative PAN affects various financial transactions, including:

  • Opening accounts with banks or cooperative banks.
  • Applying for credit and debit cards.
  • Opening demat accounts.
  • Payments exceeding Rs.50,000 for specific purposes.

Higher TDS for Inoperative PAN in Financial Transactions: Higher TDS rates apply to transactions such as the purchase or sale of a motor vehicle, immovable property exceeding Rs.10 lakh, and goods or services exceeding Rs.2 lakh per transaction.

How to Link PAN-Aadhaar and Check Status: To make an inoperative PAN operative again, follow these steps:

  1. Go to the Income Tax e-filing website.
  2. Click ‘e-Pay Tax’ and enter PAN and mobile number.
  3. Pay the penalty using Challan ITNS 280.
  4. Click ‘Link Aadhaar’ to enter PAN and Aadhaar details.
  5. Validate the process with OTP.

Conclusion: Regularly checking and maintaining the validity of PAN through Aadhaar linkage is imperative. Timely compliance ensures smooth financial transactions and avoids the consequences of higher TDS rates. Stay informed, linked, and compliant to secure your financial standing