INCOME TAX – Circular No. 9/2025 PARTIAL MODIFICATION OF CIRCULAR NO. 3 OF 2023 DATED 28.03.2023 REGARDING CONSEQUENCES OF PAN BECOMING INOPERATIVE AS PER RULE 114AAA OF THE INCOME-TAX RULES, 1962 , dated 21.07.2025.
The Central Board of Direct Taxes (CBDT) has issued Circular No. 9/2025, dated July 21, 2025, partially modifying its earlier Circular No. 3 of 2023 regarding the consequences of an inoperative Permanent Account Number (PAN).
Previously, if a PAN was inoperative due to a lack of Aadhaar linkage, higher rates of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) under Sections 206AA or 206CC of the Income-tax Act, 1961, were applicable. This led to grievances from deductors and collectors who received notices for “short-deduction/collection” when transacting with inoperative PANs, resulting in demands raised by the Income Tax Department. To address these concerns, the CBDT has provided relief: for amounts paid or credited between April 1, 2024, and July 31, 2025, deductors/collectors will not face higher TDS/TCS liability if the deductee’s/collectee’s PAN becomes operative (linked with Aadhaar) by September 30, 2025.
Furthermore, for payments or credits made on or after August 1, 2025, the relief applies if the PAN is made operative within two months from the end of the month in which the amount is paid or credited. In these specified instances, the regular TDS/TCS rates, as per other provisions of the Act, will be applicable.
