Aadhaar-PAN Linking and TDS on Pension: An Explainer

?requently, individuals wonder about the tax implications when it comes to their pensions, especially if they notice a change in the way tax deductions at source (TDS) are handled. This article focuses on a common issue faced by several individuals whose October pension was subject to a higher TDS rate due to the non-linkage of Aadhaar with PAN. We will explore the reasons behind this, the consequences, and what steps can be taken to resolve it.

Reasons for Higher TDS Rates

It is possible that your mother's TDS tax deduction for October was aspirated at a higher rate due to the non-linkage of her Aadhaar with her Permanent Account Number (PAN).

The Income Tax Department has made it mandatory to link Aadhaar with PAN to avoid higher TDS rates. This is because till now, if Aadhaar was not linked with PAN, TDS rates could be as high as 20%, compared to the usual lower rates applicable based on income slabs. This is done to ensure compliance and prevent tax evasion.

Consequences of Non-Linkage

If your mother's Aadhaar is not linked with her PAN, it could lead to several issues:

Higher TDS deductions Unavailability of TDS credit Ineligibility for claiming tax-saving instruments such as Section 80G and 80H

This can be quite inconvenient, especially for pensioners who are already working hard to manage their finances in retirement. Hence, it is crucial to ensure that all these formalities are taken care of.

What Can Be Done to Resolve the Issue

There are several steps that your mother can take to rectify the situation:

Linking Aadhaar with PAN

The most straightforward solution is to link Aadhaar with PAN as soon as possible. This can be done through several channels:

Online via the Income Tax e-filing portal Through a bank branch Through a tax office

Once the link is established, your mother should be able to avoid higher TDS rates in the future. Additionally, if the higher TDS has already been deducted, she may be able to request a refund for the excess amount deducted.

Refund Request

If the higher TDS rate has been applicable for a significant period, your mother may be eligible to request a refund.

Refunds can be claimed by filling out the necessary forms and submitting them to the Tax Department. The process might take some time, so it’s best to initiate this as soon as possible.

Understanding the Provisional Tax Payment

It’s important to note that the tax payment made under these circumstances is provisional and will be adjusted later.

The tax authority may conduct a review of the TDS deductions and adjust them at the time of filing the annual income tax returns. This is a standard practice and one that helps ensure correct tax payments.

Aadhaar-PAN Linking is Mandatory

Non-linkage of Aadhaar and PAN can lead to more than just higher TDS rates. It can result in the inoperability of PAN, making it inoperative and affecting several financial and tax-related activities.

As of now, several tax-saving schemes and deductions require the linkage of Aadhaar and PAN. If these links are not properly established, your mother may miss out on important tax benefits and credits.

Therefore, it is crucial to link Aadhaar with PAN to prevent any future complications and ensure compliance with all statutory requirements.

Conclusion

In summary, the non-linkage of Aadhaar with PAN is the reason behind the higher TDS on your mother's pension. Ensuring that Aadhaar is linked with PAN is vital for several reasons, including avoiding higher TDS rates, obtaining TDS credits, and claiming various tax-saving benefits.

We recommend that your mother takes action to link her Aadhaar with her PAN as soon as possible. This can be done through various convenient channels. Additionally, if she has already suffered from higher TDS rates due to this non-linkage, she can request a refund for the excess amount deducted.