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:
- 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. - 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
| Transaction Date | Condition for Relief |
| 1st April 2024 to 31st July 2025 | PAN made operative on or before 30th September 2025 |
| On or after 1st August 2025 | PAN made operative within 2 months from month-end of payment |
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
TDS WAS DEDUCTED AT NORMAL RATES FOR FY 2023-24. LATER FOUND THAT PAYEE PAN WAS INOPERATIVE, HENCE NOTICE OF SHORT DEDUCTION. HOWEVER PAYEE HAD FILED HIS RETURN FOR FY 2023-24 IN DECEMBER 2024.
CURERNTLY IN JANUARY 2026, WHAT SHOULD THE DEDUCTOR DO AS PAYEE MADE HIS PAN ACTIVE IN DECEMBER 2024?
WILL THIS BE COVERED BY THE RELIEF OF CIRCULARS? OR WILL THE DEDUCTOR HAVE TO PAY THE SHORT TDS AND INTEREST??
Refer Circular No. 06 of 2024 dated 23.04.2024, for all transactions upto 31/03/2024, if the PAN has become operative by 31/05/2024 relief to deductors has been provided against higher rate of TDS. If ‘inoperative status’ has been corrected on or after 01/06/2024 for transactions upto 31/03/2024, this relief is not applicable. Please check at your end and see what applies to you and if the cut-off date fails, the short deduction and interest thereon should logically apply.
If the PAN is ‘Active’ (assuming you mean, it is not ‘inoperative status’) since December ’24, for transactions entered in January ’26, normal TDS will apply.
This is our interpretation of the circulars. Please do re-verify with tax consultants.
I get the point that the circular doesn’t categorically cover PAN Cards which were made active after1/6/2024 for transactions of 2023-24.
However in our case, the deductee on linking his pan and Aadhar, got his 26 AS for FY 23-24 that reflects the TDS CREDIT AND also filed his ITR and has got the refund in his bank too. So does this now allow a ground to ask for relief. We have his 26AS, ITR Copy and Bank statement reflecting the IT refund. If yes, then how does one proceed??
The circular dated 23.04.2024 is quite clear wherein it states that for PANs made active on or after 01/06/2024, no relief is provided to the tax deductor. It is strongly advised to reach to a tax consultant who can guide better.
How to verify inoperative PAN in bulk ?
The Income Tax Dept. through TRACES allows to check one PAN at a time – it will let you know about the holder’s name, valid status & operative status. However, to our best understanding, it does not permit verifying bulk. You may log into TRACES and check this out.
Our software TDSMAN supports bulk verification which checks for ‘Inoperative’ and ‘Invalid’ PANs.
HOW TO REMOVE SHORT DEDUCTION DEMAND DUE TO INOPERATIVE PAN AFTER ABVOEMENTIONED NOTIFICATION
As mentioned in the blog, CBDT has provided relief for transactions occurring between 1st April 2024 and 31st July 2025, if the PAN is made operative on or before 30th September 2025, any short-deduction demand arising due to inoperative PAN status will be withdrawn. For transactions on or after 1st August 2025, similar relief applies provided the PAN becomes operative within two months from the end of the relevant month – after which, the demand will be removed automatically in the TRACES system.
For case-specific guidance, especially if the demand is still appearing despite the PAN being operative, we recommend reaching out to your tax consultant or contacting TRACES support.
Many thanks. Explained very well.
You are most welcome!
Glad the steps helped clarify the process.
How to verify whether a given PAN of deductee is operative or not
You can verify whether a deductee’s PAN is operative or inoperative by logging into TRACES as a deductor and following these steps:
1. Login to TRACES (https://contents.tdscpc.gov.in/) using your deductor credentials.
2. Go to Statements / Payments from the top menu.
3. Select “PAN Verification” from the dropdown.
4. Enter the PAN and Form Type you want to verify and submit.
5. The system will display the PAN status as Operative or Inoperative.