If you have not linked your PAN with Aadhaar by now, it means your PAN card stands inoperative from July 1, 2023.
The Central Board of Direct Taxes (‘CBDT’) had afforded time until 30 June 2023 to all taxpayers for the purposes of linking their Permanent Account Number (‘PAN’) Card with their Aadhar Card number.The primary reason behind undertaking such extensive exercise was to curb duplication of PAN with immediate effect since on multiple occasions, one PAN was held by multiple individuals that was leading to more problems than solutions.
"In addition to the notice of the CBDT, a few categories of individuals were exempted from the linkage i.e. (i) any person of 80 years of age and older; (ii) non-resident as per the Income Tax Act, 1961 (‘IT Act’); and (iii) non-citizen of India. In this regard, it is apparent that the exempted categories of individuals were extremely narrow and the majority was likely to fall under the category where the compliances were stated to be necessary," said Suvigya Awasthy, Partner, PSL Advocates & Solicitors.
According to the rules, failure to link PAN with Aadhaar results in the PAN card becoming inoperative, leading to various limitations and restrictions.
The Central Board of Direct Taxes (‘CBDT’) had afforded time until 30 June 2023 to all taxpayers for the purposes of linking their Permanent Account Number (‘PAN’) Card with their Aadhar Card number.The primary reason behind undertaking such extensive exercise was to curb duplication of PAN with immediate effect since on multiple occasions, one PAN was held by multiple individuals that was leading to more problems than solutions.
"In addition to the notice of the CBDT, a few categories of individuals were exempted from the linkage i.e. (i) any person of 80 years of age and older; (ii) non-resident as per the Income Tax Act, 1961 (‘IT Act’); and (iii) non-citizen of India. In this regard, it is apparent that the exempted categories of individuals were extremely narrow and the majority was likely to fall under the category where the compliances were stated to be necessary," said Suvigya Awasthy, Partner, PSL Advocates & Solicitors.
According to the rules, failure to link PAN with Aadhaar results in the PAN card becoming inoperative, leading to various limitations and restrictions.
"The tax payers will not be able to file ITRs,get tax refunds or access financial services viz -a-viz opening bank account , getting debit or credit card etc when the pan becomes inoperative. TCS and TDS will be higher for people who have not quoted Pan. Quoting pan is also mandatory in depositing over Rs 50000 in a single day in a bank or post office account," said Nanavath Bhupal Naik, MD, Shares Bazaar.
Also Read: PAN-Aadhar linking: How to check if an individual's PAN is valid or not
Also Read: PAN-Aadhar linking: How to check if an individual's PAN is valid or not
Refund of tax will not be processed
Reportedly, the failure to comply with the directions of the CBDT have resulted in the PAN Card being rendered as inoperative and subsequently, an individual would be susceptible to the consequences under the IT Act as well. A few consequences have been elucidated herein by Awasthy
Reportedly, the failure to comply with the directions of the CBDT have resulted in the PAN Card being rendered as inoperative and subsequently, an individual would be susceptible to the consequences under the IT Act as well. A few consequences have been elucidated herein by Awasthy
(i) The PAN Card will be rendered as inoperative that will preclude the individuals from quoting the same anywhere;
(ii) Refund of any amount of tax or part thereof under the provisions of the IT Act will not be processed against inoperative PAN Cards;
(iii) Interest shall not be payable on such refund for the period during which the PAN remains inoperative; and
(iv) TDS and TCS shall be deducted/ collected at higher rates.
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Taxpayers can't file returns:
"Taxpayers are unable to file income tax returns or claim refunds using the inoperative PAN.This means that individuals will face obstacles in fulfilling their tax obligations and receiving any eligible refunds. Furthermore, "Pending returns and refunds associated with the inoperative PAN are not processed," causing delays and potential financial implications, according to Ankit Rajgarhia, Principal Associate, Karanjawala & Company, Advocates.
Even pending proceedings as in the case of defective returns cannot be completed once the PAN is inoperative.
Even pending proceedings as in the case of defective returns cannot be completed once the PAN is inoperative.
Tax deducted at source and tax collected at source will be higher
"TCS and TDS are applicable at higher rates" for individuals with an inoperative PAN, resulting in increased tax deductions or collections. Moreover, "the credit for TCS/TDS does not appear in Form 26AS, nor are the related certificates available," leading to difficulties in reconciling tax-related records and compliance.
You cannot submit 15G/15H declarations for nil TDS
The inability to submit "15G/15H declarations for nil TDS" further adds to the limitations.
Various bank transactions will get impacted
The inability to submit "15G/15H declarations for nil TDS" further adds to the limitations.
Various bank transactions will get impacted
Some of the routine banking transactions like depositing of more than Rs. 50,000 in a bank account or payment of insurance premium exceeding Rs. 50,000 or even application for credit / debit card, etc will get impacted. Even conducting transactions exceeding Rs. 2,00,000 per transaction for goods or services will become a problem.
Also Read: PAN Aadhaar Link Last Day: Will Govt extend deadline? Details here
Also Read: PAN Aadhaar Link Last Day: Will Govt extend deadline? Details here
Non-linkage can also lead to blocked bank accounts
"Non-compliance may lead to tax troubles, as the Income Tax Department may deem your PAN invalid, attracting penalties and legal implications. Furthermore, incomplete financial profiles may arise, inviting scrutiny and raising red flags. Non-linkage can also lead to blocked bank accounts, disrupting essential financial transactions. By not linking PAN with Aadhaar, you may miss out on opportunities and benefits, such as easier access to banking services, seamless tax filing, and enhanced financial efficiency," said CA Manish Mishra, Virtual CFO.
Mutual fund and equity investments will be impacted
Many investors are not able to carry out MF investments exceeding Rs 50,000. According to Computer Age Management Services (CAMS), new investments in mutual funds are not possible for the PAN holders where PAN is not linked with Aadhaar.
Many investors are not able to carry out MF investments exceeding Rs 50,000. According to Computer Age Management Services (CAMS), new investments in mutual funds are not possible for the PAN holders where PAN is not linked with Aadhaar.
According to India's income tax department, here are all the transactions that cannot be conducted with an inoperative PAN
1) Sale or purchase of a motor vehicle or vehicle other than two wheeled vehicles.
2) Opening an account [other than a time-deposit referred at point No. 12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank
3) Making an application for issue of a credit or debit card.
4) Opening of a demat account with a depository, participant, custodian of securities or any other person with SEBI
5) Payment in cash of an amount exceeding Rs. 50,000 to a hotel or restaurant against bill at any one time.
6) Payment in cash of an amount exceeding Rs. 50,000 in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
7) Payment of an amount exceeding Rs. 50,000 to a Mutual Fund for purchase of its units
8) Payment of an amount exceeding Rs. 50,000 to a company or an institution for acquiring debentures or bonds issued by it.
9) Payment of an amount exceeding Rs. 50,000 to the Reserve Bank of India for acquiring bonds issued by it.
10) Deposits of cash exceeding Rs. 50,000 during any one day with a banking company or a co-operative bank.
10A) Deposits of cash aggregating to more than Rs. 2,50,000 during the period of 09th November 2016 to 30th December 2016 with a banking company, cooperative bank or post office.
11) Payment in cash for an amount exceeding Rs. 50,000 during any one day for purchase of bank drafts or pay orders or banker's cheques from a banking company or a co-operative bank.
12) A time deposit of amount exceeding Rs. 50,000 or aggregating to more than Rs. 5 lakh during a financial year with -
(i) a banking company or a co-operative bank
(ii) a Post Office;
(iii) a Nidhi referred to in section 406 of the Companies Act, 2013 or
(iv) a non-banking financial company
13) Payment in cash or by way of a bank draft or pay order or banker's cheque of an amount aggregating to more than Rs. 50,000 in a financial year for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 to a banking company or a co-operative bank or to any other company or institution.
14) Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer
15) A contract for sale or purchase of securities (other than shares) for amount exceeding Rs. 1 lakh per transaction
16) Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange for amount exceeding Rs. 1 lakh per transaction.
17) Sale or purchase of any immovable property for an amount exceeding Rs. 10 lakh or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
18) Sale or purchase of goods or services of any nature other than those specified above for an amount exceeding Rs. 2 lakh per transaction.