PAN to Become Inoperative Without Aadhaar: Here’s What Every Taxpayer Must Know
The Government of India has inserted a new section, i.e., Section 139AA, in the Income-tax Act, 1961, under the Finance Act, 2017.
According to the new rule, the government has made it compulsory for all individuals eligible to obtain Aadhaar to quote their Aadhaar Numbers while applying for PAN or filing their income tax return (ITR). This rule has been applicable since July 01, 2017. In cases where individuals do not possess an Aadhaar number yet but have applied for it and are liable to file an ITR, then they can simply mention the Enrolment ID of the Aadhaar application Form in their returns.
However, there is bad news for such individuals: this benefit of mentioning the enrolment ID has been removed from October 10, 2024. Now, taxpayers are required to mention their Aadhaar number in the PAN application Form.
If someone has been allotted their PAN by using the Aadhaar Enrolment ID because they did not have an Aadhaar number at that time, in that case, they must later inform the government of their actual Aadhaar number once they receive it. The government will announce the form and the process for giving this information.
Section 139AA says every individual who has been allotted a Permanent Account Number (PAN) as of July 01, 2017, and who is also eligible to get their Aadhaar Number, needs to inform the Income Tax Department of their Aadhaar Number on or before March 31, 2022. If an individual fails to inform the number to tax department before the said deadline, his/her PAN will be inoperative just after one day of the notified date.
The Central Board of Direct Taxes (CBDT) has announced consequences for not furnishing, intimating or quoting PAN under the Income Tax Act. These consequences are scheduled to take effect from July 01, 2023, in case PAN becomes inactive if not linked to the Aadhaar. However, taxpayers will still be given another chance for compliance by paying a fee in case PAN is linked to Aadhaar from April 01, 2022, to June 30, 2023.
The CBDT has notified several consequences of an inoperative PAN under Rule 114AAA. The following are the consequences as stated by CBDT:
- Individuals whose PAN is inoperative will not be refunded for any amount of tax.
- Interest amount will not be able to be paid on such refunds for the period. Starting from the date when the PAN becomes deactivated and ending on the date when it again becomes activated.
- If a person has to pay TDS (tax deducted at source) under Chapter XVII-B, then the tax will be deducted at a higher rate as per section 206AA.
- If a person has to pay TCS (tax collected at source) under Chapter XVII-BB, then the tax will be collected at a higher rate as per section 206CC.
