Relaxation from higher TDS/TCS in PAN Inoperative cases

Key Highlights of Circular No. 9/2025

1. Purpose

The circular partially modifies Circular No. 3/2023, which addressed consequences of a PAN becoming inoperative under Rule 114AAA of the Income-tax Rules. It provides relief to deductors and collectors who received notices for short deduction or collection of TDS/TCS due to inoperative PANs.

2. Relief Measures

• For payments/credits from 1 April 2024 to 31 July 2025:
  If the PAN is made operative by linking with Aadhaar on or before 30 September 2025, no higher TDS/TCS rate under Section 206AA / Section 206CC will apply.

• For payments/credits on or after 1 August 2025:
  Relief is extended if the PAN becomes operative (linked to Aadhaar) within two months from the end of the month in which the payment or credit occurred

In both circumstances, regular (standard) TDS/TCS rates as per the Act will apply instead of penal higher rates.

3. Scope & Impact

• Addresses automated demands raised under Sections 200A or Section 206CB for “short-deduction/collection” when PAN was inoperative, even if rectified shortly thereafter,

• Grievances stemmed from system-generated notices that failed to account for PAN becoming operative post-transaction.

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✅ Summary Table

Period	PAN operative by	Higher TDS/TCS avoided?
April 1, 2024 – July 31, 2025	By September 30, 2025	Yes (relief granted)
From August 1, 2025	Within two months after transaction month	Yes (relief granted)