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Time of India
3 days ago
- Business
- Time of India
Relief for these Property buyers and other taxpayers who got tax demand notice due to short deduction of TDS from in-operative PAN holders; Know more
What did the income tax department say? Where the amount is paid or credited from April 1, 2024 to July 31, 2025 and the PAN is made operative (as a result of linkage with Aadhaar) on or before September 30, 2025. Where the amount is paid or credited on or after August 1, 2025 and the PAN is made operative (as a result of linkage with Aadhaar) within two months from the end of the month in which the amount is paid or credited. What does this mean? How can property buyers get relief due to this circular? 'Inoperative PANs cannot be used for filing income tax returns (ITR) or conducting key financial transactions. This poses a challenge in cases such as property sales, where the seller's PAN is inactive due to non-linkage with Aadhaar. In such situations, the law mandates that the buyer must deduct TDS at 20% instead of the regular 1%. However, many buyers, unaware of the PAN status, end up deducting TDS at 1%, assuming compliance. This typically leads to a tax demand notice to the property buyer from the Income Tax Department for the shortfall of 19%.' Karundia explains how this relief works for those who short deducted TDS from April 1, 2024 to July 31, 2025: 'This benefit also applies to property buyers who failed to deduct TDS at the higher 20% rate from sellers with inactive PANs. For instance, if someone purchased a property on April 2, 2024, from a seller whose PAN was inoperative, the buyer was required to deduct TDS at 20% rather than the standard 1%. If they didn't and received a demand notice, the notice will be cancelled provided the seller activates their PAN by September 30, 2025.' Gupta explains how the relief works for those who short deducted TDS on or after August 1, 2025: The recent CBDT Circular No. 9/2025, issued on July 21, 2025, offers relief in such cases. It provides that no demand for short deduction will be raised if the deductee—i.e., the property seller—makes their PAN operative by linking it with Aadhaar within two months from the end of the month in which the payment was made. For example, if a property is purchased on August 2, 2025, from a seller with an inoperative PAN and the buyer deducts TDS at 1%, the buyer will not be penalized, provided the seller regularizes their PAN by October 31, 2025. Why did the income tax department give this relief? The Central Board of Direct Taxes vide Circular No. 03 of 2023 dated 28th March, 2023 had specified that the consequences of PAN becoming inoperative as per Rule 114AAA of the Income-tax Rules, 1962 shall take effect from 1st July, 2023 and continue till the PAN becomes operative. Further, Circular No. 06 of 2024 dated 23.04.2024 issued by the Board, provided relief to deductors/collectors from the applicability of higher TDS/TCS rates under section 206AA/206CC of the Income-tax Act, 1961 (hereinafter 'the Act') 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. Several grievances have been received from the taxpayers that they are in receipt of notices intimating that they have committed default of 'shortdeduction/collection' of TDS/TCS while carrying out the transactions where the PANs of the deductees/collectees were inoperative. In such cases, as the deduction/collection has not been made at a higher rate, demands have been raised by the Department against the deductors/collectors while processing of TDS/TCS statements under section 200A or under section 206CB of the Act, as the case may be. The Income Tax Department has given relief to those income tax payers who got an income tax demand notice due to short deduction of TDS and short collection of TCS from those deductors and collectors, who have an in-operative PAN. An PAN will be termed in-operative, if it is not linked with income tax department said that all such tax demand notices issued due to short deduction/collection of the TDS/TCS, will be deleted, if the PAN is made operative again within a specified a circular dated July 21, 2025 the Income Tax Department said: "...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:This circular says that those taxpayers who deducted TDS or collected TCS at a lower rate than otherwise prescribed for in-operative PAN cases will get relief from tax demand subject to the condition that the PAN is made operative within a specified circular mentions two different deadlines for giving this releif from short tax deduction and collection Accountant Ashish Karundia explains that numerous tax deductors and collectors have received TDS/TCS demand notices from TRACES for applying a lower tax rate on transactions involving taxpayers whose PAN was inactive at the time, often due to it not being linked with Aadhaar. "This circular issued on July 21, 2025, now provides relief in such situations. If the affected taxpayer activates their PAN by linking it with Aadhaar by September 30, 2025, any related short deduction or collection demands issued to the deductor or collector will be withdrawn."Karundia adds: 'Further, for transactions occurring on or after August 1, 2025, if the taxpayer's PAN becomes active within two months following the end of the month in which the transaction took place, the TDS/TCS demand will also be dropped. This second relief is not limited by the September 30 per Section 194-IA on property sales above Rs 50 lakh, buyers have to deduct TDS at 1% rate before making the payment to the sellers. However if the seller's PAN is in-operative then TDS at 20% rate is required to be deducted. The problem is in cases where the buyer deducted 1% TDS instead of 20% as it should be when the seller's PAN is in-operative. In such cases the property buyer will get income tax demand notice for 19% short deduction in TDS. This circular can give relief to such Accountant Mohit Gupta, partner, PNAM & Co. LLP, a chartered accountancy firm, says:ET Wealth Online has asked many chartered accountants about how this circular can give releif to property buyers, here's what they said:The Income Tax Department said this in the circular:The tax department said that to redress this grievance of taxpayers they partially modified the Circular No. 3 of 2023.
Mint
07-07-2025
- Business
- Mint
Received your EPF interest late? Do this to avoid tax trouble.
EPF members keenly await the interest credit by the Employees' Provident Fund Organisation (EPFO) every financial year. But EPFO often delays crediting it, throwing many into tax trouble. To be sure, if your contribution to EPF is more than ₹ 2.5 lakh in a year ( ₹ 5 lakh for government employees), the interest earned on the excess attracts tax deducted at source (TDS). The TDS rate is 10% if your EPF account is linked to your Permanent Account Number (PAN) and 20% if it is not. The TDS is not deducted in case taxable interest is less than ₹ 5,000. The delay in crediting interest to EPF accounts creates confusion for members about the correct financial year in which to report and pay tax on the taxable interest. Although the EPFO passbook reflects that interest has accrued up to 31 March of a financial year, the interest is actually credited the following year. For instance, interest for FY25 wasn't credited by 31 March 2025; the government only approved the FY25 interest rate in May 2025. Some subscribers have received interest credit in the past couple of weeks, that is, in FY26. "Since the interest was credited in FY26, any TDS on the taxable portion will also apply in FY26, and this will be reflected in Form 26AS and the annual information statement (AIS)," said chartered accountant Ashish Karundia. 'If a member, based on the passbook entry, includes the taxable interest in their FY25 income tax return, it could lead to issues in FY26 due to a mismatch.' Karundia added, 'There is an option in the AIS to submit feedback, indicating that the TDS pertains to interest income from the previous year, and that tax has already been paid. The system will notify the EPFO, but it's unlikely they will revise the TDS return. This will still lead to a mismatch between the ITR and AIS/26AS, and the taxpayer may receive a notice for not paying tax on interest income in FY26.' Tax experts said you should pay tax on the taxable PF interest on a credit basis, that is, in the year the EPFO credited the interest and deducted TDS. Do not do it on an accrual basis, meaning don't pay tax on the delayed interest credit you received for FY25 while filing your ITR this year. Do it next year, for income earned in FY26. This will help avoid a tax mismatch and unnecessary back-and-forth with the Income Tax Department and EPFO. You may find it easier to report EPF interest on a credit basis rather than accrual basis. For its part, the EPFO should declare and credit interest rate (and get it approved by the union government) for a particular financial year in that year itself. Doing it in the subsequent financial year and deducting TDS accordingly creates confusion for EPF members.
Mint
06-06-2025
- Business
- Mint
TDS on rent: Why the tax department needs to fix its Traces portal
Certain payments made by individuals attract tax deduction at source (TDS), but many are unaware of it. For instance, 2% TDS applies to rent exceeding ₹50,000 per month, 1% on property purchases above ₹50 lakh, and a similar rule applies to high-value freelance or contract payments. The income tax department has been tracking individuals who failed to comply with these TDS rules. Taxpayers who claimed HRA exemption while paying rent above ₹50,000 received SMS and email alerts from the I-T department. The penalty for non-compliance is steep. Tenants who did not deduct TDS on rent under 194-IB can avoid these penalties by proving that the landlord has paid tax on the rental income. This is done by filing Form 26A, a certificate from a chartered accountant (CA) confirming that the tax has been paid. This seemingly simple solution is, however, fraught with technical hurdles. Also Read: Details on rent, home loan, TDS: ITR forms seek more disclosures this year Portal problems The Traces (TDS Reconciliation Analysis and Correction Enabling System) or e-filing portal, which is needed to generate Form 26A, does not allow individual deductors to initiate the process unless the user has a tax deduction and collection account number or TAN number, tax experts told Mint. The tax department's Traces portal is an online platform that helps both deductors and taxpayers view, reconcile, and manage their TDS transactions for filing returns and claiming refunds. To be sure, individuals paying rent to resident landlords aren't required to obtain a TAN to deduct TDS. Even if someone goes through the trouble of getting a TAN, which is an entirely online process and typically takes 2-4 days, the problem doesn't end there. Chartered accountant Ashish Karundia said even when a TAN is obtained, the portal does not have Form 26QC, which is required to fill in details regarding this matter when logged in to the Traces portal. As per Section 201, defaulting tenants can show the landlord's ITR to prove that tax on rental income is paid. To do this, they should initiate Form 26A on the Traces website. The tenant should log in to the Traces platform as a deductor. He needs to initiate Form 26A, add details of non-deduction and assign the Form 26A to a CA for verification through the TAN login on e-filing portal. Also Read: TDS on rent and contract work: How small taxpayers can avoid penalties The process may seem easy, but it is an uphill task due to technical challenges. Logging into Traces through PAN will not work as Form 26A can only be initiated through 'deductor' Traces log-in, which needs a TAN, said Karundia. Deductor login is for those who deduct and deposit the TDS and taxpayer login is for the deductee on whose behalf tax is being paid (landlord in this case). Getting TAN takes 2-4 days to be issued, but even if the tenant gets a TAN number and successfully logs in to the Traces portal as a deductor, a second layer of challenge crops up, said Karundia. 'After logging in, the tenant has to initiate Form 26A and choose the type of form he's filing–26QB for TDS on property purchase, 26QC for TDS on rent or 26QD for TDS on payment to contractors. It is mandatory to choose one of these options before entering other transaction details," he explained. The Traces portal for deductors does not have this option as all three TDS deductions–property, rent and contractual services–are PAN-based and do not require a TAN in the first place. 'Even if the tenant gets a TAN and logs in to the Traces deductor portal, he will still not be able to initiate Form 26A due to unavailability of Form 26QC," said Karundia. Also Read: Relying on rental income in retirement? Take these steps to protect yourself. What needs to change Karundia said Traces should allow users to log in using PAN details instead of TAN, and allow Form 26A initiation for Forms 26QB, 26QC, and 26QD. Once this is initiated, the taxpayer can assign it to a CA through the e-portal. After the CA certifies that the recipient has paid the due tax, they can sign it and get it processed. "Currently, taxpayers can't assign Form 26A to a CA through their taxpayer (PAN) ID in Traces. So, there is a need to extend the ability of assignment of Form 26A to a CA....," said Mayank Mohanka, founder of TaxAaram India and a partner at S.M. Mohanka & Associates. For now, CAs like Karundia are maintaining Form 26A manually. 'Right now there is no other option. The other option is to have the form along with CA-certified Annexure A in physical form with the tenant, " Karundia said. Bhawna Kakkar, chartered accountant and founder, Kakkar & Company, Chartered Accountants, said she is also maintaining the Form 26A manually. 'Due to this technical limitation, such tenants cannot initiate Form 26A filing through Traces. The alternative approach is to manually submit the CA-certified Form 26A along with supporting documents (landlord's ITR, rent income proof, tax paid details) either in response to a notice received from the department or directly to the jurisdictional assessing officer." 'The tenant would still be required to pay interest under section 201(1A) at 1% per month from the month TDS was deductible till the month the landlord filed the ITR. Once the AO is satisfied that the conditions are met, the tenant is not treated as in default for the TDS, and no demand will be raised for the tax amount, only the interest may be payable," said Kakkar. The government has to necessarily address this issues faced by taxpayesr at the earliest so that the ordinary citizens who are ignorant of the TDS provisions can take necessary steps to avoid ending up being 'assessee in default', said Prakash Hegde, a Bengaluru-based CA. "Until the government makes these updates to form 26A, it is going to be big challenge for the defaulters, most of whom are ignorant of the provisions," said Hegde. Kakkar said, 'If procedures are not in sync with the law, the law should be applied instead of procedures, and the law nowhere restricts form 26QB/26QC type payments for the benefit under proviso to section 201. So, the only option left is to proceed manually and provide a manual CA certificate. We actually have given one such certificate."
Mint
01-06-2025
- Business
- Mint
I-T department is cross-verifying claims in real time. You've been warned.
NEW DELHI : For a long time, people have been getting away with making inflated or false claims in their income tax returns (ITRs). Unless returns are picked up for post-filing scrutiny by officials, the income tax (I-T) department can do little to stop individuals from beating the system. But this income tax season, this is going to change. The I-T department is rolling out an integrated verification system designed to automatically cross-check information against multiple government databases at the time of ITR filing. Imagine a taxpayer filling out inaccurate details of their investment claim—home loan details, house rent allowance (HRA), or insurance—the system will immediately throw up an error and prompt the taxpayer to modify the return. Also Read: How you can save tax by getting a mobile phone, laptop or car lease from office Meaning: Taxpayers will be caught red-handed if they try to play smart. 'You can no longer fake a loan account number or a policy document number," said Ashish Karundia, founder of Ashish Karundia & Co., Chartered Accountants. 'These are now directly mapped to your permanent account number (PAN) or Aadhaar." Cross-platform data sharing Insurance companies, for instance, already share data with the government. So, if a person tries to claim a deduction using someone else's insurance policy number, the system can identify the discrepancy. The real-time verification now extends to HRA claims, loans for housing and education, and even deductions on electric vehicles. Each claim is verified using backend integrations with banks and platforms such as the m-Parivahan app. "As soon as a taxpayer inputs any detail, say a loan number or an insurance policy, the system cross-verifies it instantly with the information they already have. If something doesn't match, it throws an error and prompts the taxpayer to modify their return," Karundia added. To be sure, so far, verification has been happening manually and after the detection of a post-filing discrepancy. 'The I-T department would look at your return, flag inconsistencies, and then issue a notice. It was slow and added to the workload of tax officials," he said. Now, the department aims to entirely automate this process. To do so, the newly notified ITR forms require taxpayers to provide a detailed breakup of income tax deductions through specific drop-down fields, replacing the earlier practice of entering a single consolidated figure, according to CA Vijaykumar Puri, Partner at VPRP & Co LLP. Also Read: Legal minefield: Decoding capital gains tax on the sale of leasehold and tenancy rights He explained how earlier, someone could simply write ₹1.5 lakh under Section 80C without specifying if it was in PPF, ELSS, or LIC. 'Now, taxpayers must specify the exact amounts invested in instruments like PPF, ELSS, or LIC. This added transparency will not only deter fake claims but also give the tax department clear visibility into the nature of each deduction," he said. A nudge towards the new tax regime The move from human-led scrutiny to system-led verification is crucial for ensuring better compliance and fewer fraudulent claims. 'It significantly reduces the scope for manual oversight and any manipulation. It eliminates case-by-case verification, conserves departmental resources, and ensures quicker, more reliable compliance," he added. Less human involvement also means that people won't be able to fabricate investment proofs like rent receipts for claiming HRA deduction. 'When people know that everything is digitally captured, the chance of fraud automatically goes down," Karundia said. Karundia explained that the move is a step closer to former finance minister Arun Jaitley's broader strategic vision of lower tax rates, fewer exemptions, and minimal discretion introduced. In essence, by automating cross-verification and reducing human intervention, the I-T department is pushing taxpayers towards an exemption-less new tax regime. Also Read: Capital gains on equities: Here's all you need to know when filing tax returns this year The I-T department on 27 May extended the ITR filing due date for FY25 (AY26) from 31 July to 15 September. The decision was made after a delay in issuing the notification of ITR forms.
Economic Times
29-04-2025
- Business
- Economic Times
ITR forms yet to be notified by Income Tax Department: Will it lead to ITR filing deadline extension?
Reasons for delay in ITR forms notification Live Events ITR forms and audit report utilities must be made available by 1st April of the assessment year. Any delays must be justified with recorded reasons. If delays impact taxpayers' ability to comply, authorities must consider extending filing deadlines and notify the public. Will ITR filing deadline be extended due to delay in ITR forms? The Income Tax Department is yet to notify the income tax return (ITR) forms for the financial year 2024-25 or assessment year 2025-26. Over the last 3-4 years, it has been seen that the Income Tax Department usually notifies the forms either before the end of the financial year or at the start of the assessment year. However, this year, the tax department has yet to notify the ITR forms, even though one month is about to Wealth online decodes the reasons for the delay in the ITR forms notification and whether this delay could lead to an extension of the ITR filing deadline According to tax experts, there are certain reasons for the delay in the notification of ITR forms. These include income tax changes announced in the Finance Act in July 2024 and structural Bohra, Partner, NA Shah & Associates - a tax consulting firm says, "If one look at the last three years release of ITR Forms by CBDT, it will be observed that ITR Forms are released well before the end of the relevant financial year for which taxpayer is required to file his tax return. For example, ITR Forms for AY 2022-23, 2023-24 and 2024-25 were notified on 30.03.2022, 10.02.2023 and 22.12.2023, respectively. For AY 2025-26, the ITR Forms have not yet been notified by CBDT. This delay could be attributed to the fact that the Central Board of Direct Taxes (CBDT) is trying to upgrade or fix their ITR utilities to accurately map the data fetched from various sources to avoid any error in processing the tax return."Usually, taxpayers who need to claim income tax refunds file their income tax return as early as possible so that they can get their income tax refund in a timely manner from the tax Karundia, Practising Chartered Accountant, says, "The delay in issuing the ITR forms and their corresponding utilities for AY 2025-26 may stem from enhanced disclosure requirements, integration with Annual Information Statement (AIS)/Taxpayer Information Statement (TIS) data, and the implementation of new provisions of income tax relevant to assessment year 2025-26. The intention could be to ensure a comprehensive verification process before ITR forms release, aiming for accurate data mapping to minimise errors and avoid mismatches that may lead to taxpayer grievances."Tarun Kumar Madaan, Practising Chartered Accountant, says, "The full Budget for FY 2024-25 was presented on 23rd July and became an Act in August 2024. In regular years, the Budget is presented in February and becomes an Act by March. So, the CBDT have sufficient time to make changes in ITR forms by adding relevant changes according to the changes in the income tax laws. This could be a possible reason for the delay in releasing forms. Further in Budget 2024, there were a lot of amendments and capturing them in ITR forms that will take time. At least that capital gains date of 23rd July 2024 and change in holding period & rate in all asset classes, removal of indexation, etc, are some of the changes that need time to incorporate in this year's ITR forms."It is important to note that certain court judgments have asked the CBDT to notify the ITR forms by April 1 to provide sufficient time to the taxpayers to file their income tax says, "The timely availability of Income Tax Return (ITR) forms is crucial for enabling taxpayers to meet their compliance obligations within prescribed statutory timelines. Multiple High Courts have emphasised this through various landmark judgments, such as the Punjab and Haryana High Court in the Vishal Garg v. Union of India case, the Delhi High Court in Avinash Gupta v. Union of India and the Gujarat High Court in the case of All Gujarat Federation of Tax Consultants v. CBDT. Through these rulings, the courts across multiple jurisdictions, i.e., Punjab & Haryana, Delhi, and Gujarat, have stressed that:The judiciary has consistently recognised the inconvenience and hardship caused by administrative delays and placed the responsibility squarely on the tax authorities to ensure smooth and fair compliance is a delay in notifying ITR forms, which means taxpayers will have less time to file their income tax returns. Will CBDT extend the ITR filing deadline from July 31, 2025, for AY 2025-26?Karundia says, "Ideally, these forms should be made available by March 31 to give taxpayers sufficient time to file their tax returns, especially since the deadline for ITR filing is fixed. As there is a delay in ITR forms, CBDT should extend the last date to file ITR."Concurring with the view Shah says, "In the past, it has been seen that if there is a delay in notifying ITR Forms or utilities, the CBDT has extended the due date of filing the tax returns. This year, also, almost one month has already been lost, and the ITR Forms and necessary utilities for filing the tax returns have not been notified. Therefore, taxpayers are deprived of this time for preparing the tax return and considering this, it is possible that CBDT may extend the due date."
