• Notification Date: 07-07-2023
• Notification No: N/A

People who Missed PAN-Aadhaar Linking Deadline have to pay Higher TDS on Dividend Income

The deadline to link PAN with Aadhaar was June 30, 2023. If PAN is not linked with Aadhaar, PAN will become inoperative from July 1, 2023, according to the CBDT notification dated March 28, 2023. 
 
There are many disadvantages if PAN becomes inoperative. One of them is you have to pay higher TDS on dividend income. The TDS rates that apply to shareholders are determined by their residency status and classification in accordance with the Act's rules. As a result, the company will withhold tax at source from dividend payments at rates based on the type of shareholders and subject to the fulfilment of certain conditions. 

Also note that a valid Permanent Account Number (or "PAN") will be necessary. In accordance with the requirements of Section 139AA (2) read with Rule 114AAA of the Act and within the specified time frames, shareholders are required to link their Aadhaar with their PAN. 

Grasim Industries emailed those receiving dividends stating, “Please also note that where tax is deductible under the provisions of the Act and the PAN of the shareholder is either not available or PAN available in records of the Company is invalid / inoperative, tax shall be deducted @ 20% as per section 206AA of the Act. Unless exempted by one of the Act's provisions, tax will be withheld at source under Section 194 of the Act at a rate of 10% on the amount of dividend that is payable. TDS would not, however, be applicable to Individuals whose total dividend payments from the Company throughout the fiscal year did not exceed Rs 5,000.” 
 

According to the rules, from 1st July, 2023, the PAN of taxpayers who have failed to intimate their Aadhaar, as required, shall become inoperative and the consequences during the period that PAN remains inoperative will be as follows: 

(i) no refund shall be made against such PANs; 
(ii) interest shall not be payable on such refund for the period during which PAN remains inoperative; and 
(iii) TDS and TCS shall be deducted /collected at higher rate, as provided in the Act.