Circular No. 9/2025 ; F. No. 275/04/2024- IT(B) (modification of circular No. 3 of 2023)

Existing provision:

Prior to this circular, several grievances have been received whereby tax deductors received tax demands to deduct higher rate of TDS in case deductee’s PAN was deemed inoperative on account of non linkage with Aadhar as per rule 114AAA of the income tax rules which came into effect from 1^st July 2023 along with interest on short deduction if TDS was previously deducted at normal rates in force.

Relief provided by circular earlier (Circular No. 6/2024):

This circular dated 23/04/2024 provided relief to deductors/collectors from the applicability of higher TDS/TCS rates under section 206AA/206CC of the Income-tax Act, 1961 for transactions entered into upto 31/03/2024, where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31/05/2024.

Further relief provided by circular (Circular No. 9/2025):

This circular dated 21/07/2025 states that there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC of the Act, as the case maybe, in the following cases:

1. For payments/credits made from 01/04/2024 to 31/07/2025 – If the PAN becomes operative on or before 30/09/2025 (i.e., linked with Aadhaar), normal TDS/TCS rates shall apply.
2. For payments/credits made on or after 01/08/2025 – If the PAN is made operative within 2 months from the end of the month in which the transaction took place, the deductor/collector shall not be liable to deduct/collect tax at the higher rate.

Examples to explain above:

Deductors and taxpayers are advised to ensure PAN-Aadhaar linkage is completed in time to avoid the risk of demands for short deduction or collection. The key deadlines are 30th September 2025 and a 2-month window for transactions from 1st August 2025 onwards.

CBDT Circular 9/2025 PAN Aadhaar TDS Relief

To download the relevant CBDT Circulars, click below:

• Circular No. 6 of 2024
• Circular No. 9 of 2025

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Nayanaben Hasmukhbhai Patel & Ors. vs. Revenue [Special Civil Application No.14635 of 2024]

Background of the Case

A search and seizure operation conducted by the Income Tax Department at the premises of petitioner no. 3, Anandkumar Hasmukhbhai Patel. During the proceedings, jewellery worth Rs. 77.82 lakh was discovered, of which Rs. 42.86 lakh was accepted under CBDT Instruction No.1916 as belonging to his family members and not seized. However, the remaining jewellery worth Rs. 34.96 lakh along with Rs. 7 lakh in cash was seized under Section 132 of the Income Tax Act. Subsequently, the jewellery was subjected to scrutiny during the assessment for AY 2014–15. Though a partial relief of ₹15 lakh was granted, the Assessing Officer added Rs. 19.96 lakh to the taxable income of petitioner no. 3.

This addition was later deleted in full by the CIT(A) on 02.04.2019, a decision that reached finality as no appeal was filed by the department. Despite this, the Income Tax Department did not release the entire seized jewellery, prompting the petitioners to approach the Gujarat High Court under Article 226 of the Constitution.

Arguments by the Appellant

The appellant argued that once the addition had been deleted by the CIT(A), and the penalty amount under Section 271(1)(c) had been duly paid, there remained no outstanding tax liability for AY 2014–15. They contended that the Department’s continued retention of jewellery worth Rs. 16.33 lakh, especially after releasing a portion worth Rs. 18.63 lakh to petitioner no.1, was unjustified. It was also emphasized that the jewellery in question was not owned by petitioner no.3, but by his wife and mother, as evidenced by a joint affidavit submitted on 07.11.2024.

The petitioners invoked Section 132B of the Income Tax Act, asserting that the seized assets could only be retained against liabilities pertaining to the relevant assessment year, and not for future demands. Relying on both statutory provisions and precedents, they pleaded for the immediate release of the remaining seized jewellery and sought interest compensation for the undue retention.

Respondent’s Response

The respondent, Revenue argued that a substantial outstanding demand of Rs. 3.36 crore existed against petitioner no.3 for subsequent assessment years, and that the remaining jewellery was being rightfully retained to safeguard recovery of these dues. The Department took the stand that despite the relief granted for AY 2014–15, the assets were lawfully being adjusted against the petitioner’s overall liability. Thus, they sought validation of the order dated 12.11.2024, through which the partial release of jewellery had been made, while the remainder was retained as security for future recoveries.

Court Findings and Decision

The Gujarat High Court held that the Income Tax Department could not retain jewellery seized for one assessment year against liabilities arising from other assessment years, especially when the assessment in question had concluded without any outstanding demand. The Court noted that the CIT(A)’s order had attained finality and that there was no pending liability for AY 2014–15. Furthermore, the department’s reliance on general instructions could not override the specific statutory limitations of Section 132B as it stood at the relevant time. The Court directed the respondents to release the remaining jewellery and dismissed the justification for withholding the same against unrelated tax dues.

To download official order, Click Here

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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A significant update to the Direct Tax Vivad Se Vishwas Scheme, 2024, was announced to offer relief to taxpayers who were previously unable to apply due to specific circumstances.

In an order dated January 20, 2025, the Ministry of Finance addressed these issues, enabling more taxpayers to settle their pending income tax disputes through the scheme.

This scheme, introduced in the 2024 Budget, is designed to help resolve ongoing tax disputes by waiving interest and penalties if the taxpayer settles the disputed tax amount. However, taxpayers have until January 31, 2025, to pay the full disputed amount to avail of a reduced settlement. After this date, the payment terms will change.

Enacted under the Finance (No. 2) Act, 2024, and effective from October 1, 2024, the scheme aims to resolve direct tax disputes amicably. However, certain situations created complications, including cases where:

1. An order was passed before the cutoff date of July 22, 2024.
2. The time for filing an appeal against the order was still open as of the cutoff date.
3. Appeals were filed after July 22, 2024, but within the allowed time frame.
4. Appeals were submitted without a delay condonation application.

To address these complications, the Central Government has now clarified that such appeals will be considered as pending as of July 22, 2024, making those taxpayers eligible for the scheme. The disputed tax amount will be calculated based on the appeal filed, and the relevant scheme rules will apply to these cases.

The order, issued under Section 98 of the Finance (No. 2) Act, 2024, reaffirms the government’s commitment to resolving tax disputes efficiently and clarifies procedural guidelines. Taxpayers are encouraged to review their cases and seek professional advice to take advantage of the scheme before the deadlines.

To download the official order, click here.

For understanding the Direct Tax Vivad se Vishwas Scheme 2024, click here.

CBDT Clarifies DTVSV Scheme 2024

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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As per the CBDT Circular No. 6 dated 23-04-2024, Many taxpayers have complained that they have received notices stating that they failed to comply with the terms of the “short- deduction/collection” of TDS/TCS when conducting transactions in which the PANs of the deductees and collectors were non-functional.

When processing TDS/TCS statements under section 200A or section 206CB of the Act, depending on the circumstances, the Department has initiated demands against the deductors/collectors because the deduction or collection has not been made at a higher rate.
The CBDT has offered exemption from tax demand resulting from inoperative PAN non order to resolve the problems of deductors/collectors, provided that the following requirements are met:

• Transaction (which pertaining to TDS or TCS) were entered into up to dated 31.03.2024, and
• The Dedutee’s or Collectee’s PAN become operative (as a result of linkage with Aadhaar) on or before 31.05.2024.

If the aforementioned requirements are met, the deductors/collectors will not be considered in arrears for taxes deducted at the regular rate for transactions completed through March 31, 2024, and they won’t be obligated to deduct/collect taxes at higher rates specified under section 206AA/206CC for transactions completed through March 31, 2024.

The tax demand that was made will thus no longer be available on the portal.

Important note:

The extension till May 31, 2024, is for the payee’s PAN and Aadhar to be linked in order to provide relief for transactions made through March 31, 2024, only.

For transactions occurring on or after 01.04.2024, it is essential to ensure that the PAN of the deductee is linked to Aadhaar and remains valid on the date of deduction, if inoperative then the deductor/collector must deduct/collect tax at a higher rate under section 206AA/206CC.

This circular is an important step that the CBDT has taken to address grievances and help those deductors and collectors who were forced to deduct or collect tax at a higher rate because the payee’s PAN was non-operative but who instead deducted or collected tax at a normal rate because they were unaware of transactions completed up until March 31, 2024.

To Download Official Circular, please visit https://www.incometax.gov.in/iec/foportal/sites/default/files/2024-04/Circular%20no%206%20of%202024%20on%20TDS%20TCS.pdf

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship.

The information on this site is not intended to be a substitute for professional advice.”

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