Beware! You may face higher TDS, disruption in banking services from July 1 if you fail to do this



Beware! You may face higher TDS, disruption in banking services from July 1 if you fail to do this

You may face disruptions in your banking services, debit and credit card payments, online payment through mobile banking and UPI, face higher tax deduction at source (DTS) on you interest, dividend and other incomes, discontinuation of your systematic investments as well as your trading and demat accounts may become inoperative or inactive in case you fail to link your Permanent Account Number (PAN) with your Aadhaar.

This is because recent amendments to the Income Tax Rules have made it mandatory to link Aadhaar with PAN, on or before June 30, 2021. If the PAN is not linked with Aadhaar, the PAN shall be deemed to have become inoperative / invalid in accordance with Rule 114AAA(3) of the Income-tax Rules, 1962 (‘Rules’), from July 1, 2021.

As per section 206AA(6) of the Income-tax Act, 1961 (‘Act’), where the PAN provided to the deductor is inoperative / invalid, it shall be deemed that the deductee has not furnished his PAN to the deductor and the provisions of sub-section 206AA(1) (consequential withholding at higher rate) shall apply accordingly.

Therefore, in accordance with Rule 114AAA(3) of the Rules, where PAN has become inoperative / invalid due to non-linking with Aadhaar, TDS shall be deducted at a higher rate of 20 per cent as per section 206AA of the Act.

The higher TDS rate of 20 per cent will, however, be deducted only for those income – like interest on fixed deposit, dividend etc – which are currently subject to TDS. Where TDS is not applicable, there won’t be any impact.

As tax deduction is the responsibility of the payer, after the linking is done, you have to provide the necessary information to the respective authorities – like banks and Post Office for interest income, companies for interest and dividend income, Asset Management Companies (AMCs) for dividend on Mutual Fund (MF) schemes, etc – to ensure that higher TDS is not applied on your income.

So, you have to comply within the time limit, because once higher tax is deducted, the payer may not process / perform any refund/adjustments in such cases at a later date and you have to claim the refund of the excess tax deducted at the time of filing your Income Tax Return (ITR).

So, remember that every person who has been allotted a PAN and is eligible to obtain Aadhaar number must update their Aadhaar number to the Income tax department (PAN- Aadhaar Linkage) as per Section 139 AA of the Income Tax Act 1961 positively by June 30, 2021, unless extended further.

Linking of PAN and Aadhaar will help you to:

  • Keep your PAN operative
  • Smooth functioning of banking transactions
  • To enjoy uninterrupted services on your credit card
  • Avoid levy of higher TDS on interest earned (if applicable)
  • Avoid higher TDS (deduction at 20 per cent) on dividend declared
  • Avoid your Trading and Demat Account from becoming inoperative/inactive

Source:-financialexpress

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