Consequences of Failure to link PAN with Aadhaar

CBDT clarification on the Consequences of Failure to link PAN with Aadhaar

Home » Learn » Income Tax » CBDT clarification on the Consequences of Failure to link PAN with Aadhaar

CBDT clarification on the Consequences of Failure to link PAN with Aadhaar

CBDT has issued an Order dated 30th March 2022 and specified 1st April 2023 as the date from which the PAN shall become inoperative if the PAN is not linked to Aadhaar. Further, CBDT vide Circular No. 7/2022 dated 30.03.2022 has clarified the consequences of failure to link PAN with Aadhaar and clarifies the specified date for Rule 114AAA(2) of the Income-tax Rules, 1962 (‘Rules’).

The Synopsis of CBDT Circular

The CBDT has clarified that all the consequences provided under the Income-tax Act for not furnishing, intimating, or quoting PAN shall come into effect from 01-04-2023 if PAN becomes inoperative due to non-linking of it with Aadhaar.

  • As per a circular issued by CBDT on 30.03.2022, PAN, not linked to Aadhaar, would become “inoperative” after March 31, 2023.
  • Those taxpayers who link their PAN with biometric Aadhaar by June 30, 2022, would be required to pay late fees of Rs 500. Beyond that, the penalty would rise to Rs 1,000.
  • To mitigate the inconvenience to taxpayers, a window of opportunity has been provided to taxpayers up to March 31, 2023, to intimate their Aadhaar to the prescribed authority for Aadhaar-PAN linking without facing repercussions
  • However, till 31st March 2023 the PAN of the assessee who has not intimated their Aadhaar will continue to be functional for the procedures under the Act, like furnishing of ITR, processing of refunds, etc

After March 31, 2023, the PAN of taxpayers who fail to intimate their Aadhaar  shall become inoperative and all the consequences under the Act for not furnishing, intimating, or quoting the PAN shall apply to such taxpayers

Section 139AA  – PAN to Become Inoperative after 01.04.2023

Instances had come to the notice of the Income-tax Department that multiple permanent account numbers (PANs) have been allotted to one person or one PAN has been allotted to more than one person.

To have a robust way of de-duplication of PAN database, the Finance Act, 2017 inserted section 139AA in the Income-tax Act, 1961 making it mandatory for a taxpayer who is eligible to obtain Aadhaar, to quote his Aadhaar in the application form for PAN and return of income.

Section 139AA of the Income-tax Act, 1961 provides for linking of PAN with Aadhaar by a notified date which is 31st March 2022 as per Notification No. 113/2021 dated 17.09.2021.

It is also provided that in case of failure to intimate the Aadhaar number, the PAN allotted to the person shall be made inoperative after the date so notified in such manner as may be prescribed.

Section 234H – Late fees for non-linking of PAN with Aadhaar

The Finance Act, 2021 inserted a new section 234H in the IT Act to complete the process of PAN-Aadhaar linking for identifying bogus PANs.

This section provides that “where 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 shall be liable to pay a fee not exceeding a sum of one thousand rupees, as may be prescribed, at the time of making intimation under sub-section (2) of section 139AA after the said date”.

However, till 31st March 2023, the PAN of the assessees who have not intimated their Aadhaar will continue to be functional for the procedures under the Income Tax Act, like furnishing of return of income, processing of refunds, etc

After 31st March 2023, the PAN of taxpayers who fail to intimate their Aadhaar, as required, shall become inoperative and all the consequences under the Income Tax Act for not furnishing, intimating, or quoting the PAN shall apply to such taxpayers.

Rule 114AAA of Income Tax Act – Manner of Making PAN Inoperative

Rule 114AAA of the Income Tax Act prescribes the manner of making permanent account number (PAN) inoperative.

CBDT vide Notification No. 17/2022 dated 29.03.2022 in G.S.R. 229(E) through Income-tax (Third Amendment) Rules, 2022 amended Rule 114AAA (2) to specify the ‘specified date’ from which this sub-rule will take effect.

In this regard, CBDT vide an Order dated 30.03.2022 specifies the date 1st April 2023 as the specified date from which the PAN shall become inoperative under Rule 114AA

CBDT clarification on the Consequences of Failure to link PANS with Aadhaar

Circular No. 7/2022 dated 30.03.2022 the CBDT has issued Clarification concerning the relaxation of provisions of Rule 114AAA (2). In case of failure to intimate the Aadhaar Number by the last extended notified date i.e. 31.03.2022, the PAN allotted to the person shall be made inoperative by the provisions of the Income Tax Act.

Consequences if a PAN becomes inoperative

The CBDT has clarified that all the consequences provided under the Income-tax Act for not furnishing, intimating, or quoting PAN shall come into effect from 01-04-2023 if PAN becomes inoperative due to non-linking of it with Aadhaar. This will have several implications described as follows:

  • The taxpayer shall not be able to file an Income Tax return using the inoperative PAN
  • Pending returns will not be processed by the Income Tax Department
  • CBDT will not Pending refunds to inoperative PANs
  • CBDT also clarified that the Pending proceedings as in the case of defective returns cannot be completed once the PAN is inoperative
  • Income Tax will be required to be deducted at a higher rate as PAN becomes inoperative

In addition to the above, the taxpayer might face difficulty at various places like banks and other financial portals, as PAN is one of the important KYC criteria for all kinds of financial transactions, the Circular states.

Clarification on Relaxation of provisions of Rule 114AAA

CBDT also clarified that to have a smooth application of section 234H and existing rule 114AAA, it is clarified that the impact of sub-rule (2) of rule 114AAA shall come into effect from 1st April 2023 and the period beginning from 1st April 2022 and ending with 31st March 2023, shall be the period during which the Rule 114AAA(2)  shall not have its negative consequences.

However, the person shall be liable to pay a fee by sub-rule (5A) of rule 114. Thus, if a person links his PAN with Aadhaar by 31st March 2022, he is required to pay any late fees.

If the person fails to link his PAN with Aadhaar by 31st March, his PAN will become inoperative from next year i.e. 1st April 2023. If he intends to link his PAN with Aadhaar after 31st March 2022, then he has to pay late fees of Rs. 500 or Rs. 1000.

Click here to get the CBDT official notification pertaining to clarification on the Consequences of Failure to link PAN with Aadhaar

Other Related Guides

Linking Aadhaar with UAN Linking Aadhaar with UAN The Employee Provident Fund Organisation has made it mandatory to link Aadhaar with Employee Provident Fund (PF) account. Th...
Aadhaar Enabled Payment System Aadhaar Enabled Payment System Aadhaar Enabled Payment System (AEPS) is a secure payment platform for financial transactions based on Unique Identifi...
Linking Aadhaar to Bank Accounts Linking Aadhaar to Bank Accounts The government has made it necessary for all bank account holders to complete linking Aadhaar to bank accounts. Bank...
Linking Aadhaar to Ration Card Link Aadhaar Card to Ration Card Online The Government of India has directed the citizens to link the Aadhaar card with various vital documents such ...
Download ePAN Card ePAN Card Download Procedure to download ePAN card through the NSDL or UTITSL portal. ePAN card is a digitally signed Permanent Account Number, i.e....

Post by Renu Suresh

Renu is experience content writer specialised in compliances and company rules.