The Central Board of Direct Taxes (CBDT) has issued Circular 3/2023 explaining the consequences that will apply if a Permanent Account Number (PAN) becomes inoperative due to non-linking with Aadhaar, in view of amendment in IT Rule 114AAA made vide Notification 15/2023. CBDT has explained the consequences such as no refund, no interest payable on refunds, and higher tax deductions/collections, in the event of failure to link PAN with Aadhaar as per the revised deadline.
CBDT Circular 3/2023
CBDT Income Tax Circular 3/2023 dated 28/03/2023: Consequences of PAN becoming inoperative as per the newly substituted rule 114AAA
CBDT Notification 15/2023
CBDT Income Tax Notification 15/2023 dated 28/03/2023: Substitution of IT Rule 114AAA (Manner of making permanent account number inoperative) w.e.f. 01/04/2023
Linking Aadhaar with PAN
Under the provisions of the Income-tax Act, 1961, every person who has been allotted a PAN as of July 01, 2017, and is eligible to obtain an Aadhaar Number, must intimate their Aadhaar to the prescribed authority on or before March 31, 2022. If the individual fails to do so, their PAN becomes inoperative.
However, if the individual intimated their Aadhaar number after March 31, 2022, a fee must be paid, and the PAN becomes operative within 30 days from the date of intimation of the Aadhaar number.
The deadline for linking PAN and Aadhaar has been extended to June 30, 2023, to allow more time for taxpayers to link without facing repercussions.
Consequences of an Inoperative PAN
As per amended IT Rule 114AAA, if an individual’s PAN becomes inoperative due to non-linking with Aadhaar, further consequences will apply from the specified date until the PAN becomes operative. These consequences include:
1. No Refund
The individual will not receive any refund of tax or part thereof, due under the provisions of the Income-tax Act, during the period when the PAN is inoperative.
2. No Interest on Refunds
Interest shall not be payable on such refunds for the period beginning with the date specified under sub-rule (4) and ending with the date on which it becomes operative.
3. Higher Tax Deductions/Collections
Where tax is deductible under Chapter XVIIB in case of such person, such tax shall be deducted at a higher rate, in accordance with the provisions of section 206AA. Where tax is collectible at source under Chapter XVII-BB in case of such person, such tax shall be collected at a higher rate, in accordance with the provisions of section 206CC.
Procedure for Making PAN Operative Again
If an individual’s PAN has become inoperative due to non-linking with Aadhaar, they can make it operative again by linking their PAN with Aadhaar and paying a fee in accordance with sub-rule (5A) of rule 114. Once the fee is paid and the PAN is linked, it will become operative within 30 days from the date of intimation of Aadhaar number.
Verification of PAN Status
The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the formats and standards along with the procedure for verifying the operational status of permanent account number under sub-rule (1) and sub-rule (2).
It is essential for individuals to link their Aadhaar with their PAN to avoid the consequences of an inoperative PAN. The extension of the deadline until June 30, 2023, provides more time for taxpayers to link without facing repercussions. However, individuals must ensure that they link their Aadhaar with their PAN as soon as possible to avoid any adverse consequences.