CBDT – Relief of TDS / TCS due to Inoperative PAN

The Central Board of Direct Taxes (CBDT) has issued Circular No. 9/2025 dated 21st July 2025, providing relief from demands raised for short deduction or collection of TDS / TCS in cases where the PAN of the deductee / collectee was inoperative at the time of transaction, but was subsequently made operative.

This circular partially modifies Circular No. 3/2023 dated 28th March 2023. As per Rule 114AAA of the Income-tax Rules, 1962, if PAN is not linked with Aadhaar by the specified date, it becomes inoperative. Consequently, TDS and TCS had to be deducted or collected at higher rates as per Section 206AA or Section 206CC of the Income-tax Act.

In the past, CBDT Circular No. 3/2023 clarified that in cases where PAN was inoperative, TDS / TCS must be deducted / collected at the higher rate and demands could be raised accordingly. Subsequently, Circular No. 6/2024 offered partial relief in cases where PAN was made operative by a cut-off date.

CBDT Circular No. 9/2025 now provides further relief in the following manner:

1. For transactions between 1st April 2024 and 31st July 2025:
   – If TDS / TCS was deducted / collected at the applicable rate (not higher rate) despite PAN being inoperative at that time, no demand shall be raised for short deduction/collection if the PAN is made operative on or before 30th September 2025.
2. For transactions on or after 1st August 2025:
   – If TDS / TCS was deducted / collected at the applicable rate, and the deductee/collectee makes the PAN operative within two months from the end of the month in which the transaction occurred, no demand shall be raised.

In both scenarios, the deductor/collector shall not be treated as assessee-in-default, and no penal interest or penalty shall apply.

Applicable Time Period

Download the Official Circular:

To read the full details of Circular No. 9/2025, dated 21st July 2025, you can download the official document from the following link:
Download Circular Document