PAN-Aadhaar linking: Here’s what happens if your PAN card becomes inoperative

New Delhi: The Central Board of Direct Taxes (CBDT) has pushed out the deadline for linking the PAN Card with Aadhaar from March 31, 2022 to March 31, 2023, providing significant relief to individuals. However, on April 1, 2022, anyone who links the two documents will be fined.

The CBDT announced this in a notification dated March 29, 2022. To complete the PAN-Aadhaar linking system for detecting false PANs, the Finance Act of 2021 inserted a new section 234H to the Act.

If a person who is required to intimate his Aadhaar under subsection (2) of section 139 AA fails to do so on or before a notified date, he will be liable to pay a fee of not more than Rs 1,000, as may be prescribed, at the time of making intimation under subsection (2) of section 139AA after the notified date, according to this new section.

The CBDT has announced that attaching a PAN to an Aadhaar number will result in a punishment of Rs 500 for the first three months (until June 2022) and a fee of Rs 1,000 after that.

“Further, rule 114AAA of the Income-tax Rules specifies that if a person’s PAN has become inoperative, he will not be able to give, intimate, or cite his PAN and shall be liable to all the consequences under the Act for such failure,” according to a CBDT circular dated March 30, 2022.

If a person’s PAN becomes inoperative, it will have consequences like:

(i) The person will not be able to file a tax return with an invalid PAN.

(ii) Returns that have not been processed will not be processed.

(iii) Inactive PANs are not eligible for pending refunds.

(iv) When the PAN is inactive, pending processes, such as defective returns, cannot be completed.

(v) As PAN becomes inactive, tax will have to be deducted at a greater rate.

Because PAN is a crucial KYC criterion for many types of financial transactions, the taxpayer may have problems filling out other forms.

PAN-Aadhaar linking deadline

With the CBDT’s latest deadline extension, assessees who have not yet informed their Aadhaar will be able to use their PAN card for Act operations such as filing returns of income and processing refunds till March 31, 2023.

However, if a taxpayer fails to link their PAN to their Aadhaar by March 31, 2023, their PAN would become inactive and they will be subject to all of the Act’s penalties for not providing, informing, or citing their PAN. After informing the prescribed authority of Aadhaar and paying the prescribed price, an inactive PAN can be restored again.

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