The Central Board of Direct Taxes (CBDT) has recently issued a notification that lists the various consequences that will be applicable to an individual if their PAN becomes inoperative due to non-linking with Aadhaar. In this regard, the CBDT has substituted Rule 114AAA of the Income-tax Rules, 1962 to specify the consequences that would follow. As per the notification, the consequences of an inoperative PAN include no refund, no interest payable on refunds, and higher tax deductions/collections.
An individual who fails to link their Aadhaar number as required by law will have their PAN (Permanent Account Number) declared inoperative, leading to the following consequences:
Refunds: Any refund of tax, either in full or part, due under the Income-tax Act, will not be granted to the individual. This implies that even if an individual is eligible for a refund under the Income-tax Act, they will not be able to receive it until their PAN becomes operative again by updating their Aadhaar number.
Interest: In addition to refunds, the individual will not receive any interest payable on such refunds during the period starting from the date mentioned in sub-rule (4) of Rule 114AAA and ending on the date when the PAN becomes operative again. This means that the individual will not only lose out on their refund amount, but also the interest earned on that amount, which can be a significant sum of money.
Higher deduction/collection rate: In case tax is deductible under Chapter XVJJ-B or collectible at source under Chapter XVJJ-BB, the rate of tax deduction/collection shall be higher as per the provisions of Section 206AA/206CC. This means that the individual will have to pay a higher rate of tax on their income or transactions until their PAN becomes operative again.
These consequences will be applicable from 1st July 2023 until the PAN becomes operative again. The process to update the Aadhaar number and make the PAN operative again will require a fee of Rs. 1000, as per the existing rules.
It is important to note that these consequences will not apply to individuals who have been granted an exemption from linking the Aadhaar number under sub-section (3) of Section 139AA of the Income-tax Act. This exemption is applicable to individuals who are not residents of India (NRI), or who are aged 80 years or above at any time during the previous year.
In conclusion, it is critical for individuals to ensure timely compliance with the provisions of Section 139AA of the Income-tax Act, 1961, read with Rule 114AAA of the Income-tax Rules, 1962. The implications of failing to link the Aadhaar number with PAN can be severe and can cause significant financial losses. Individuals are advised to take advise of CA in gurgaon and to link their Aadhaar number as soon as possible to avoid any adverse consequences for their PAN status.
It is important to note that the government’s emphasis on linking Aadhaar to PAN is to create a more robust tax system, eliminate fraudulent tax practices, and improve tax compliance. By linking Aadhaar to PAN, the government aims to create a more transparent and efficient tax system that can benefit everyone in the long run.
Therefore, it is essential for individuals to understand the importance of providing their Aadhaar number and complying with the law. Failure to comply with these rules can not only lead to financial losses but also legal consequences. Individuals should take immediate action to update their Aadhaar number and ensure that their PAN remains operative to avoid any adverse implications on their financial standing.