The Permanent Account Number (PAN) and Aadhaar are vital identification documents for Indian citizens. The PAN card, issued by the Income Tax Department, is primarily used for tax-related purposes, while Aadhaar, a 12-digit unique ID, is issued by the Unique Identification Authority of India (UIDAI). Linking PAN and Aadhaar has been made mandatory by the government to streamline tax compliance and curb evasion.

Penalty for PAN-Aadhaar Non-Linking

Latest Updates:

• Deadline: The last date to link PAN with Aadhaar was June 30, 2023. PAN cards not linked by this date became inoperative from July 1, 2023.
• Extension: Taxpayers now have until May 31, 2024, to complete the linking process. Failure to link by this date will result in higher tax deduction/collection at source (TDS/TCS) under Sections 206AA and 206CC of the Income Tax Act.
• Penalty: Those linking their PAN with Aadhaar after the deadline must pay a penalty of ₹1,000. Once linked, the PAN will become operative within 30 days.

Who Is Exempt from Linking PAN with Aadhaar?

The following individuals are exempt:

1. Residents of Jammu & Kashmir, Assam, and Meghalaya.
2. Non-resident Indians (NRIs) as per the Income Tax Act.
3. Individuals aged 80 years or above (Super Senior Citizens).
4. Foreign citizens.

Consequences of Not Linking PAN with Aadhaar

If PAN and Aadhaar are not linked:

• The PAN card becomes inoperative, rendering it unusable for filing income tax returns (ITR) or claiming tax refunds.
• Pending returns and refunds will not be processed.
• Higher rates of TDS/TCS will apply.
• The PAN holder cannot submit Form 15G/15H for nil TDS.
• Certain transactions will be restricted, including:
  • Opening bank accounts.
  • Applying for debit/credit cards.
  • Large cash deposits exceeding ₹50,000 in a day.
  • Purchases of goods/services above ₹2,00,000.

However, the PAN can be reactivated by paying the penalty and linking it with Aadhaar.

Steps to Reactivate Inoperative PAN

1. Pay Penalty:

   • Visit the Income Tax e-Filing Portal and select the e-Pay Tax option.
   • Provide your PAN, verify with OTP, and proceed with payment under the "Fee for delay in linking PAN with Aadhaar" category.
   • Payment can be made through various modes, including net banking, debit card, or payment gateway (only with authorized banks).

2. Link PAN and Aadhaar:

   • After 4-5 days of payment, go to the Income Tax e-Filing Portal.
   • Select the Link Aadhaar option, validate your details, and submit the request.
   • Alternatively, you can visit a PAN service center to complete the linking.

Importance of PAN-Aadhaar Linking

1. Essential for filing ITRs and availing tax refunds.
2. Mandatory for accessing government services, such as subsidies and passport applications.
3. Required for high-value financial transactions and obtaining a new PAN card if lost or damaged.

How to Avoid Penalties in the Future?

Taxpayers are advised to link PAN with Aadhaar before the extended deadline of May 31, 2024, to avoid penalties and complications. Early compliance ensures smoother financial and tax-related transactions.