Link Aadhaar with your PAN to save double tax on dividends

Investors have received messages from select companies on double TDS on dividend income whose Aadhaar number is not linked with Permanent Account Number (PAN). This comes after Central Board of Direct Taxes (CBDT) warned of double TDS deduction if taxpayers do not file returns on regular basis or have not linked Aadhaar with the PAN.

While sending a mail to its shareholders, a listed company said that tax will be deducted at source under Section 194 of the Act, at the rate of 10% on the amount of dividend where shareholders have registered their valid Permanent Account Number. In case, shareholders do not have PAN or have not registered their valid PAN details in their account, TDS at the rate of 20% shall be deducted under Section 206AA of the Act.

It further added that no tax shall be deducted on the dividend payable to resident individuals, if the total dividend amount to be received by them during the financial year 2021-22 does not exceed Rs 5,000 or the shareholder provides Form 15G (applicable to individual) / Form 15H (applicable to an Individual above the age of 60 years), provided that all the required eligibility conditions are met.

“In the absence of valid PAN, tax will be deducted at a higher rate of 20%, as per Section 206AA of the Act. Shareholders are also requested to ensure Aadhaar number is linked with PAN. In case of failure of linking Aadhaar with PAN within the prescribed timelines, PAN shall be considered inoperative and, in such scenario, tax shall be deducted at higher rate of 20%,” the company said in the email communication.

Several individuals including avoid filing income tax returns as they do not want to declare their earnings from various sources including interest income, dividend income and rental income. The fear is that they would come under the tax net. From July 1, individuals, who have not filed income tax returns for FY2018-19 and 2019-20, could also be subjected to higher TDS.