Relief for TDS-TCS Payers: PAN-Aadhaar Linking Deadline Extended, Tax Notices to Be Withdrawn

 In a major relief to taxpayers, the Income Tax Department has announced that notices issued for short deduction or collection of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) due to inactive PAN cards will be withdrawn—if PAN is linked to Aadhaar within the prescribed deadline. The decision comes in response to numerous complaints from taxpayers who received such notices despite their transactions being genuine.

Why Were These Notices Issued?

With increasing efforts toward transparency and accountability in the financial system, the government made PAN-Aadhaar linking mandatory. Failure to link the two results in the PAN card being marked as “inoperative”. Consequently, when deductors or collectors make TDS or TCS payments using an inoperative PAN, they may receive tax demand notices for non-compliance or short deductions.

Taxpayers complained that these notices were being issued even when the transactions were legitimate, simply because the recipient or payer had not linked their PAN with Aadhaar. This raised concerns and confusion across businesses and individual filers alike.

What Has the Tax Department Decided?

In a circular issued on July 21, 2025, the Income Tax Department clarified that deductors and collectors will be given relief from such notices if they ensure PAN-Aadhaar linking within the new timelines.

Here’s how the relief structure works:

✅ Scenario 1: Transactions from April 1, 2024, to July 31, 2025

• If the TDS/TCS payment or collection was made during this period, and

• The PAN is linked with Aadhaar on or before September 30, 2025,

• ➤ Then any demand notice related to inoperative PAN will be cancelled.

✅ Scenario 2: Transactions from August 1, 2025, onwards

• If TDS or TCS is paid/collected on or after August 1, 2025, and

• PAN is linked with Aadhaar within 2 months from the end of the transaction month,

• ➤ Then, the PAN will be treated as active for that month and no notice will be issued.

PAN-Aadhaar Linking Timeline at a Glance:

Transaction Period	Deadline to Link PAN with Aadhaar
April 1, 2024 – July 31, 2025	On or before September 30, 2025
On or after August 1, 2025	Within 2 months from the end of the transaction month

What Is the Impact of This Decision?

This move provides significant relief to deductors and collectors who were being penalized even for compliant transactions. It also ensures that genuine taxpayers are not burdened due to technical lapses related to PAN status. However, the relief is conditional—PAN must be linked to Aadhaar within the applicable deadlines.

Failing to do so may still attract higher TDS/TCS rates, non-compliance notices, or even penalties in some cases.

Why Did the Income Tax Department Take This Step?

The circular mentions that the department received several complaints from taxpayers, stating that deductees or collectees hadn’t linked their PAN with Aadhaar at the time of the transaction. As a result, the PAN was considered inactive, leading to short deduction or collection notices for no fault of the deductor.

To address this systemic issue and ease the burden on honest taxpayers, this conditional exemption was introduced.

Key Takeaways for Taxpayers:

• Link your PAN with Aadhaar before the new deadlines to avoid complications.

• Review your TDS/TCS transactions to ensure they align with compliance norms.

• Keep a regular check on the Income Tax e-filing portal for circulars and updates.

Final Word

This latest circular by the Income Tax Department is a welcome move that acknowledges practical challenges faced by taxpayers. It strikes a balance between regulatory enforcement and taxpayer convenience. However, to fully benefit from this relief, meeting the deadline is essential.

If you haven’t linked your PAN with Aadhaar yet, now is the time to act.