Tax Demands Over Non-Linked PANs Leave Firms in a Tight Spot

By: Admin | August 27, 2024 | Categories: Income Tax News | 4 Min Read

Many employers are grappling with demand notices from the Income Tax Department for short deduction of tax on employees’ incomes due to non-compliance with the May 31 deadline for linking PAN and Aadhaar numbers. This has led to issues even for workers earning below the taxable income threshold.

Key Issues:

• Higher Tax Rates: The Revenue Department warned that unlinked PANs would become inoperative after May 31, resulting in tax deductions at higher rates and withheld refunds. Despite this, some tax authorities have applied these higher rates to incomes below the taxable threshold.
• Employer Dilemma: Companies are now asking employees to link their PAN and Aadhaar post-receipt of demand notices. However, there’s no clarity on how the tax authorities will handle these cases, especially for those who linked PAN and Aadhaar after the deadline.
• Grievances: Employers are facing difficulties recovering tax amounts from employees, particularly those earning below the threshold or those who have left the organization.

Expert Advice:

• Revising Tax Returns: For the financial year 2023-24, it’s advisable for employers to deposit any outstanding tax amounts if PAN-Aadhaar linkage was not completed by May. Employees should then file or revise their tax returns for the year after linking their PAN and Aadhaar.
• Avoiding Notices: Employers must ensure that all employees link their PAN and Aadhaar to avoid short deduction notices, which could lead to interest and penalties.

This situation underscores the importance of timely compliance with PAN-Aadhaar linkage to avoid unnecessary tax complications.

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