The 60-second version
Section 206AA mandates 20% TDS when payee has no PAN or inoperative PAN — returning NRIs must link PAN-Aadhaar on day one and file ITR to recover excess TDS.
Link PAN-Aadhaar before first bank interest credit — 206AA default is 20%
Section 206AA requires deductors to withhold at 20% when payee has no PAN or PAN is inoperative under Section 139AA.
Returning NRIs often hold valid PAN from pre-naturalisation but skip Aadhaar linkage — bank continues 20% TDS on FD interest until linkage reflects.
KYC stack: Aadhaar + PAN redesignation guide for full linkage sequence.
206AA vs normal TDS
| Payment | With valid PAN | 206AA no/inoperative PAN |
|---|---|---|
| Bank interest | 10% Section 194A | 20% |
| Dividend | 10% Section 194 | 20% |
| Contractor payment | 1–2% Section 194C | 20% |
| Professional fees | 10% Section 194J | 20% |
206AA fix sequence
Check PAN status
E-filing portal — operative or not.
Link Aadhaar
Rs 1,000 fee if applicable.
Wait 7–15 days
Linkage propagation.
Inform bank
Submit updated PAN.
File ITR
Claim excess TDS refund.
Flow
206AA kit
- PAN card.
- Aadhaar.
- Linkage ack.
- Form 26AS.
- Bank FD stmt.
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Most expensive mistake
Skipping linkage on return day one costs 10% extra TDS all year — recoverable only via ITR.
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What rate?
20% under Section 206AA when PAN missing or inoperative — higher than normal section rate.
vs 206AB?
206AB is higher TDS for non-filers; 206AA is for missing/inoperative PAN — both can apply.
OCI eligible?
OCI can hold PAN and Aadhaar — linkage fixes 206AA for resident redesignation.
Form 13?
Lower TDS certificate from AO if linkage delayed but tax liability lower.
Refund path?
Excess TDS in Form 26AS — claim in ITR after PAN operative.
15G/15H?
Invalid if PAN inoperative — fix linkage before submitting.
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