Home / News / India /  PAN-Aadhaar linking: 500 fine if failed to link in 3 months, penalty doubles after June 30
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Although the Central Board of Direct Taxes (CBDT) has extended the PAN- Aadhaar linking deadline to March next year, however, if a taxpayer or individual does not link these two important personal identification then they will be facing a penalty.

The government has been motivating citizens to link their Permanent Account Number (PAN) with the 12-digit identification number, Aadhaar since 2017. With effect from April 1, 2017, the government has inserted 139AA in the IT Act which makes it mandatory for a taxpayer to quote their Aadhaar in the application form for PAN and return of income.

The decision of the Income Tax department to make PAN - Aadhaar linking compulsory was to avoid duplication or bogus PANs. It was brought to notice that multiple PANs have been allotted to one person or one PAN is allotted to more than one person and hence the IT department brings forth the process of de-duplication of PAN database with the section mentioned above.

However, the deadline to link PAN with Aadhaar has been extended on several occasions and now the latest due date is set on March 31, 2023. To ensure that taxpayers are giving importance to PAN - Aadhaar linking, the department has announced a host of penalties that can be avoidable or lessened only if the linking is done.

On March 30, CBDT introduced a sub-section (2) under section 139AA.

Under the new provisions of the sub-section, CBDT directs that a fine of 500 is levied "in case where such intimation is made within three months from the date referred to in sub-section (2) of section 139AA."

The new guidelines have come into effect from April 1, 2022. That means, a penalty of 500 is applicable for PAN - Aadhaar linking within three months, i.e. June 30, 2022. If failure to do so after June 30, then the penalty has been increased to 1,000 in all other cases.

Further, in a circular on March 31, CBDT said, "the Finance Act, 2021 inserted a new section 234H in the 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."

Also, CBDT stated that rule 114AAA of the IT rules provides that if PAN of a person has become inoperative, he will not be able to furnish, intimate or quote his PAN and shall be liable to all the consequences under the Act for such failure.

These consequences are:

1. The person shall not be able to file return using the inoperative PAN.

2. Pending returns will not be processed.

3. Pending refunds cannot be issued to inoperative PANs.

4. Pending proceedings as in the case of defective returns cannot be completed once the PAN is inoperative

5. Tax will be required to be deducted at a higher rate as PAN becomes inoperative.

Additionally, the tax payer might face difficulty at various other fora like banks and other financial portals, as PAN is one of the important KYC criterion for all kinds of financial transactions.

Hence, CBDT has said "in order to have smooth application of section 234H and existing rule 114AAA, it is clarified that the impact of sub-rule (2) of rule 114AAA i.e. where a person. whose permanent account number has become inoperative under sub-rule (1). is required to furnish. intimate or quote his permanent account number under the Act. it shall be deemed that he has not furnished. intimated or quoted the permanent account number. as the case may be in accordance with the provisions of the Act and he shall be liable for all the consequences under the Act for not furnishing. intimating or quoting the permanent account number. 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 said sub-rule shall not have its negative consequences of the nature referred to in the said sub-rule or specified in paras 4 and 4.1 above. However, the taxpayer shall be liable to pay a fee in accordance with sub-rule (5A) of rule 114."


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