PAN-Aadhaar linking: What is the penalty you must pay to make PAN operative?

The last day to link your Permanent Account Number (PAN) with your Aadhaar card is June 30, 2023. To link your PAN with Aadhaar, you need to visit www.incometax.gov.in. However, failing to complete the process will have several consequences.  

PAN is a unique number issued to individuals and businesses for tax purposes. The Aadhaar number is issued to all residents. The income tax (I-T) department has made linking PAN and Aadhaar cards mandatory to ease financial transactions. 

Who needs to link Aadhaar and PAN? Section 139AA of the Income Tax Act provides that every individual who has been allotted a permanent account number (PAN) as of the 1 day of July 2017 and who is eligible to obtain an Aadhaar number shall intimate his Aadhaar number in the prescribed form and manner. In other words, such persons must link their Aadhaar and PAN before the prescribed date, details mentioned on the Income Tax Department’s website. 

PAN not linked with Aadhaar card: A person who fails to intimate the Aadhaar number following section 139AA of the Income-tax Act read with rule 114AAA shall face the following consequences: 

• Failing to link your Aadhaar and PAN will automatically make the PAN inoperative. You will not get a refund of any amount of tax due under the provisions of the Income Tax Act. 
• No interest will be payable to you on such refund for the period, beginning with the date specified under sub-rule (4) of rule 114AAA and ending with the date on which it becomes operative; 
• Where tax is deductible under Chapter XVJJ-B in case of such a person, such tax will be deducted at a higher rate, following the provisions of section 206AA; 
• Where tax is collectable at source under Chapter XVJJ-BB in case of such person, such tax shall be collected at a higher rate, per the provisions of section 206CC.  
• These consequences will come into effect from July 1, 2023, until the PAN becomes operative. To make it operative, you will need to pay a fee of Rs 1,000 to make the PAN operative by intimating it with the Aadhaar number. 
• You may not be able to file income tax returns (ITR) without PAN, due to which you may not get the due returns you were eligible for. 
• You need PAN to make several bank transactions. For instance, you need to furnish PAN details for depositing over Rs 50,000 in a single day in the bank. With PAN becoming inoperative, you cannot carry out such transactions. 

Shilpa Mankar Ahluwalia, Partner & Head - Fintech, Shardul Amarchand Mangaldas & Co. said, "Failure to link PAN and Aadhaar by June 30 will make financial and tax transactions difficult for all those not in compliance. Without an operative PAN, individuals cannot make tax filings or claim tax refunds. There may also be higher tax implications. Tax and government authorities consider the linkage as an important step to strengthen KYC checks and monitor financial transactions under the PMLA."

These consequences shall take effect from July 1, 2023, and continue till the PAN becomes operative. A fee of Rs 1000 will continue to apply to make the PAN operative by intimating the Aadhaar number.

Amit Gupta, Managing Director at SAG Infotech said, "Linking PAN (Permanent Account Number) with Aadhaar card has become an important requirement for individuals in India. Failure to link PAN with the Aadhaar card can have several consequences. First, it may invalidate the PAN card, preventing it from being used for various financial and government transactions. In addition, without linking PAN and Aadhaar, there may be problems in filing income tax returns, as the Aadhaar number is required for electronic verification. Failure to comply with the mandate to link PAN and Aadhaar could result in penalties or legal consequences from the Income Tax Department. In addition, the linked PAN and Aadhaar data facilitates the government in curbing tax evasion and identifying individuals with multiple PAN cards. Therefore, it is important to ensure timely and accurate linking of PAN with Aadhaar to avoid inconvenience and comply with legal requirements."

Watch: Delhi's IGI Airport gets Self-Baggage Drop facility, to reduce waiting time by 15-20 minutes. Watch how it works

Also watch: MCX shares plunge 12%; know what is 63 Moons issue and why it is dragging the stock. Should you buy MCX shares?