Penalty for Not Linking PAN and Aadhaar

Under the Indian tax regulations, linking PAN with Aadhaar has become a mandatory requirement. If anyone with a PAN card fails to complete the process, then their PAN will become inoperative. It can also affect their tax filing, refunds, and other financial transactions.

The Central Board of Direct Taxes (CBDT) has issued updated guidelines for all those individuals who have obtained their PAN card by using an Aadhaar enrolment ID instead of using the actual Aadhaar number. They are required to complete the PAN-Aadhaar linking process before December 31, 2025.

If you miss this deadline, then your PAN card will become inoperative from January 1, 2026, which can affect tax compliance and financial activities. In this blog, we have explained the PAN-Aadhaar linking process, all the important timelines, and the possible consequences.

How Much Amount Indian Govenment has Collected for the PAN Aadhaar Link Penalty?

The Indian Government has collected approx Rs 600 crores in penalties for the delay in PAN-Aadhaar linking, and there are 11.48 crore PAN cards still unlinked as of January 29, 2024. If you do not link your Aadhaar and PAN before the final deadlines, then it can result in a penalty of Rs 1,000, and your PAN will become inactive, which can cause a lot of financial complications.

As per the information shared by the Indian Government from July 1, 2023, to January 31, 2024, they have earned approx Rs 601.97 crore as late fees from individuals who have failed to link PAN and Aadhaar after the June 30, 2023, deadline. Also, the Income Tax Department announced that unlinked PANs became inoperative from July 1, 2023. It also results in no refunds and higher TDS/TCS rates. The individuals can reactivate their PAN cards by paying a late fee of Rs 1,000.

What is the Penalty for Non-Linking of PAN and Aadhaar?

The penalty for failing at the PAN-Aadhaar linking is set by the CBDT at Rs 1,000. If the individuals link their PAN and Aadhaar after May 31st, 2024, they have to pay this penalty. There is also a penalty for higher TDS/TCS collection; they have to pay it at a higher amount.

For the salaried individuals, the employer deducts a higher TDS and deposits it with the Indian Government. Also, the PAN card will become inoperative if it has not been linked with their Aadhaar card after May 31st, 2024.

Who Needs to Link PAN and Aadhaar?

According to Section 139AA(2A) of the Income Tax Act, every individual who has obtained a PAN card on or before 1 July 2017 and is eligible to obtain an Aadhaar number is needed to link both documents.

This requirement is for the Indian citizens who file the income tax returns, make investments, or make the high value tarnsactions. Aadhaar-PAN linking is necessary for smooth tax compliance and financial reporting.

If an eligible individual couldn't complete the PAN-Aadhaar linking process, their PAN card becomes inoperative. You will be restricted to many essential tax-related services, such as processing refunds, filing returns, opening bank accounts, and making certain financial transactions.

Also Want to Know About Aadhaar PAN Details Mismatch Fixes? Check Now!

Last Date to Link PAN With Aadhaar

The last date to link the PAN card with Aadhaar was May 31st, 2024, set by the Central Board of Direct Taxes (CBDT) and the Indian Government. June 1st onwards, the PAN cards will become inoperative. To operate your PAN again, you will have to pay the PAN Aadhaar link penalty under sections 206AA and 206CC of the Income Tax Act, 1961.

Steps To Pay Late Fee for Aadhaar-PAN Linking

Here are the steps that you can follow to pay the late fee for Aadhaar-PAN linking:

• Visit the official portal of the Income Tax Filing website of India Government and then go to the Aadhaar-PAN linking section.
• Select the challan number ITNS 280 and submit the PAN-Aadhaar link request.
• Visit the applicable tax stated under Major Head 0021 (Income Tax Other than Companies) and Minor Head 500 (Other Receipts).
• Choose the mode of payment and then enter the required details, including address, PAN number, and assessment year.
• Enter the captcha shown on the screen and pay the PAN Aadhaar link penalty.
• After payment, you will get a receipt for it, and then you can start the process of linking your PAN and Aadhaar to avoid further complications.

Who are Exempted from PAN-Aadhaar Linking?

As per the Indian Government, certain individuals are exempted from linking their PAN and Aadhaar cards. Here are those individuals:

• Non-Resident Indians (NRIs): The individuals who are classified as Non-Resident Indians (NRIs) under the Income Tax Act are not required to link their PAN and Aadhaar.
• Super Senior Citizens: Individuals aged 80 years or more at any time during the previous year do not need to link PAN and Aadhaar.
• Individuals not citizens of India: The foreign nationals are exempted from PAN-Aadhaar linking even if they have a PAN card.
• Residents of Meghalaya, Assam, and Jammu & Kashmir: All the individuals living in the mentioned states are exempted from the PAN-Aadhaar linking process.

This list of exemptions can change as per new regulations or government notifications, so you should always check for the latest information.

Importance of Linking PAN with Aadhaar Card

Here is the importance of PAN-Aadhaar Linking:

1. Filing Income Tax Returns

A PAN card is compulsory to file the ITRs and to receive the TDS/TCS refunds. As per the Indian Government, it has become mandatory to link PAN and Aadhaar to file the income tax returns.

2. Reducing Tax Evasion

For the citizens who have linked their PAN and Aadhar, the high-value transactions can be better tracked and monitored by the Indian Government. This will help in reducing tax evasion and making sure that the tax system becomes more transparent.

3. Access to Government Services

To access different government services and subsidies, it is necessary to link your PAN and Aadhaar. Hence, PAN_Aadhaar linking is vital to access them and get their benefits.

4. Avoiding PAN Deactivation

If you fail to link your PAN and Aadhaar, then it can make your PAN account may be deactivated. This also means that you will not be able to perform any type of financial transaction that needs a PAN number. This includes investing in securities, opening a bank account, or buying property.

5. Easy Tax Compliance

If your PAN and Aadhaar are linked, then tax compliance becomes more efficient and easier. It also simplifies the process of getting the refunds, processing ITRs, and tracking the financial transactions. 

Consequences of PAN-Aadhaar Non-Linking

If your PAN-Aadhaar linking is pending before the prescribed deadline, then your PAN becomes inoperative, and you may face the following restrictions:

• The taxpayers may not be able to file their income tax returns or claim refunds with an inactive PAN.
• As per the applicable tax rules, TDS and TCS can be deducted at higher rates.
• Your pending ITRs may remain unprocessed, and refunds may not be issued.
• Your credits related to TDS or TCS may not show in Form 26AS, and the certificate may not be generated.
• You may not submit Form 15G or 15H for nil TDS.

Affected Financial Activities:

• Applying for debit or credit cards
• Opening a new bank account
• Some high-value banking transactions
• Investing in mutual fund units
• Transactions that involve prepaid payment instruments more than the prescribed thresholds.
• Buying or selling goods or services of more than Rs 2,00,000 per transaction.
• Cash deposits of more than Rs 50,000 in a day with banks or post offices.
• Purchasing bank drafts or pay orders in cash of more than Rs 50,000 in a day.
• Making time deposits with the banks, NBFCs, or similar types of institutions beyond specified limits.

Your PAN card can be reactivated, usually within 30 days after linking Aadhaar and paying the applicable late fee for Aadhaar-PAN linking, that is, Rs 1,000. 

How to Activate an Inoperative PAN Card and Link it with Aadhaar? 

Your PAN card can become inoperative because of the non-linking of your PAN card and Aadhaar card. But you can easily activate an inoperative PAN card again by following the given steps:

1. Go to the Income Tax e-filing Portal.
2. Then, go to the 'Quick Links' option and click on 'e-Pay Tax'. 
3. Under the PAN/TAN tab, enter your PAN number and then enter it again under the column of 'Confirm PAN/TAN'. Then, enter your mobile number and click on the continue button.
4. Enter the OTP you have received on the registered mobile number, and you will be redirected to a new page for e-pay tax. Then, click on the continue.
5. Choose the Assessment Year and select 'Other Receipts (500)' under the 'Type of Payment (minor Head)'. Select 'Fee for delay in linking PAN with Aadhaar' and click Continue.
6. A penalty amount for non-linking of PAN and Aadhaar will be shown under the 'Other' tab. Then, click on the 'Continue' button and pay the applicable amount.

How to Pay PAN Aadhaar Link Penalty?

You can pay the penalty for non-linking of PAN with Aadhaar Card on the Income Tax e-filing Portal by using a debit card, net banking, NEFT/RTGS, over the counter, or the payment gateway option. After the successful payment, you can link your PAN with Aadhaar. 

The payment gateway option is available for you if you have an account with the given authorised banks:

• Axis Bank
• Bank of India
• Bank of Baroda
• Bank of Maharashtra
• Canara Bank
• City Union Bank
• Central Bank of India
• Federal Bank
• HDFC Bank
• ICICI Bank
• IDBI Bank
• Indian Bank
• Induslnd Bank
• Indian Overseas Bank
• Jammu and Kashmir Bank
• Kotak Mahindra Bank
• Karur Vysya Bank
• Punjab and Sind Bank
• Punjab National Bank
• RBL Bank
• South Indian Bank
• State Bank of India
• UCO Bank
• Union Bank of India

Conclusion

It has become mandatory for the Indian Government to link your PAN card and Aadhaar card. The last set date was 31st May, 2024. As both of them are important documents, it is necessary to link both of them before the due date. The PAN card becomes invalid because of non-linking. To make your PAN card operative again and gain your financial privileges back, you need to pay the Aadhaar-PAN link penalty of Rs 1,000. 

You may also seek expert help from the professionals of Visament. They can help you link your PAN and Aadhaar. They are available on the platform 24/7 and provide services at an affordable price.