As per the Income Tax Act, it is mandatory to link the PAN with Aadhaar. Failing to link these two results in the PAN becoming inoperative.
Note: TDS computation for inoperative PAN is effective from June 2024 payroll onwards.
When a PAN is inoperative, TDS is deducted at the rate of 20% or higher.
Here's how to compute it:
Step 1: Compute Taxable Salary
Include Basic Salary, HRA, Allowances, and Bonuses.
Subtract exemptions and eligible deductions, such as HRA, Standard Deduction, and deductions under Section 80C.
Step 2: Calculate TDS
Apply a 20% TDS rate or a higher rate to the taxable income resulting from an inoperative PAN.
Example:
Taxable Income after Deductions: ₹6,00,000
TDS at 20%: ₹1,20,000
Note: No cess is added when tax is computed at the rate of 20% due to an inoperative PAN. Only the flat TDS rate is applicable.
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Related Links:
Video - To watch the video PAN updation, click here.
FAQs - To read more FAQs about PAN, click here.
Documentation - To read more about the PAN page, click here.
Product Update - To read about the product update, click here.
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