CBDT Grants Relief from Higher TDS/TCS Rates for Inoperative PANs Upon Timely Aadhaar Linkage
Overview of CBDT Circular No. 09/2025
The CBDT issued Circular No. 09/2025 on July 21, 2025, to help deductors and collectors facing demands for short deduction or collection of TDS/TCS due to inoperative PANs under Rule 114AAA. The circular partially modifies Circular No. 3/2023. It states that no higher TDS/TCS rates under sections 206AA/206CC will apply if:
- Payment happens between April 1, 2024, and July 31, 2025, and the PAN becomes operative by September 30, 2025; or
- Payment happens on or after August 1, 2025, and the PAN becomes operative within two months from the end of that month.
Standard TDS/TCS provisions under Chapters XVII-B and XVII-BB will still apply.
Background: Earlier Circulars on PAN Inoperability
Earlier, the CBDT issued Circular No. 03 of 2023 on March 28, 2023. It specified that consequences of PAN becoming inoperative under Rule 114AAA would apply from July 1, 2023, until the PAN becomes operative again.
Additionally, Circular No. 06 of 2024, dated April 23, 2024, provided relief for transactions up to March 31, 2024. It allowed deductors/collectors to avoid higher TDS/TCS rates if the PAN became operative (linked with Aadhaar) by May 31, 2024.
Taxpayer Grievances and Demands Raised
Taxpayers have reported receiving notices claiming they defaulted on short deduction/collection of TDS/TCS when the PANs were inoperative. Since the deduction was not made at higher rates, the Department raised demands against the deductors/collectors during TDS/TCS statement processing under sections 200A or 206CB of the Act.
Relief Measures and Conditions
To address these grievances, the CBDT clarified the following relief conditions:
- If payment occurs between April 1, 2024, and July 31, 2025, and the PAN becomes operative (via Aadhaar linkage) by September 30, 2025, deductors/collectors bear no liability for higher TDS/TCS under sections 206AA/206CC.
- If payment occurs on or after August 1, 2025, and the PAN becomes operative within two months from the month-end of the payment, the same relief applies.
In both cases, the usual deduction and collection rules under Chapters XVII-B or XVII-BB will continue to apply.
