Income Tax Department Sets Sept 30, 2025 as Deadline for TDS/TCS Relief on Inoperative PANs

The Income Tax Department has announced significant relief for many taxpayers, including property buyers, who faced tax demands due to incorrect TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) deductions. This applies when the PAN (Permanent Account Number) of the person receiving payment was "inoperative" because it wasn't linked with Aadhaar.

Who Has Been Issued Tax Demand Notices for TDS/TCS?

Previously, if a PAN was inoperative, a higher rate of TDS or TCS was supposed to be applied. Many individuals or businesses, unaware of this, deducted tax at the normal rate. This led to the Income Tax Department issuing demand notices for the "short deduction" of tax. A common example is property buyers who deducted 1% TDS on property sales of ₹50 lakh or more, when they should have deducted 20% if the seller's PAN was inoperative.

Deadlines for Availing Relief from Tax Demand Notices

In a circular issued on July 21, 2025, the Income Tax Department stated that these tax demand notices will be cancelled if the inoperative PAN is made operative again by linking it with Aadhaar within a specific timeframe.

There are two key deadlines:

• For payments made between April 1, 2024, and July 31, 2025: The PAN must be made operative on or before September 30, 2025.
• For payments made on or after August 1, 2025: The PAN must be made operative within two months from the end of the month in which the payment was made.

Who Benefits from the Revised Deadline?

This relief isn't just for property buyers. It applies to all types of tax deductions and collections where a higher rate should have been applied due to an inoperative PAN. For instance, if a company paid professional fees or a business paid a contractor and deducted tax at the standard rate, they will also get relief if the recipient's PAN is linked to Aadhaar by the new deadlines.

Why This Change?

The Income Tax Department issued this circular to address numerous complaints from taxpayers who received demand notices for short deductions. This move ensures fairness for those who deducted or collected tax in good faith, providing them a chance to correct the PAN status.

Read more: LIC Ties Up with Govt to Empower Rural Women via Bima Sakhi Yojana.

Conclusion

This is welcome news for many taxpayers. If you've received a notice for short TDS/TCS deduction related to an inoperative PAN, ensure the concerned PAN is linked with Aadhaar by the specified dates to get relief from the tax demand.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.