PAN-Aadhaar linking rule change from July 1: Double penalty for not linking PAN with Aadhaar from tomorrow

New Delhi: The Central Board of Direct Taxes (CBDT), which is the apex decision making body on direct taxes, had in the past extended the deadline for linking Permanent Account Number (PAN) with Aadhaar. However, there's a good and a bad news related to the linking of PAN card with Aadhaar card. As per a circular issued by CBDT, PAN, not linked to Aadhaar, would become "inoperative" after March 31, 2023. This means that you can still use your PAN card for a year now.

The Income Tax Department has said that non-linking of PAN with Aadhaar by March 31 would attract penalty of up to Rs 1,000, but such PAN will remain functional for one more year till March 2023, for filing ITR, claiming refunds and other I-T procedures.

Now, the bad news is that those taxpayers who link their PAN Card 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.

In order to mitigate the inconvenience to taxpayers, as per notification dated March 29, 2022, 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, the CBDT said, adding such intimation would have to be accompanied by late fees.

"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 Act, like furnishing of return of income, processing of refunds etc," the CBDT statement said.

What happens when your PAN becomes inactive?

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

Once your PAN becomes inactive, you will be restricted from doing financial transactions (where quoting of PAN is mandatory like mutual funds), subjected to TDS at higher rates and penalty under section 272B.