Consequences of Inoperative Account Dated 25/01/2024

Who falls under the exempt category for PAN-Aadhaar linking?

The exempt category people need not link PAN-Aadhaar within 30th June 2023. The exempt category is as follows:

• Individuals residing in the states of Jammu and Kashmir, Assam and Meghalaya.
• A non-resident taxable person as per the Income-tax Act, 1961.
• People aged more than 80 years (Super Senior Citizens).
• Persons who are not citizens of India.

Consequences of not linking PAN with Aadhaar card

When the PAN-Aadhaar cards are not linked within the last date, it becomes inoperative as a result of which:

• The pending returns will not be processed, and pending refunds will not be issued to inoperative PAN cards.
• The TCS/TDS will be applicable at a higher rate.
• The TCS/TDS credit will not appear in Form 26AS, and TCS/TDS certificates will not be available.
• Taxpayers will be unable to submit 15G/15H declarations for nil TDS.

Transactions that cannot be done with inoperative PAN

The following transactions cannot be done since the PAN card will be inoperative:

Banking Transactions

• Open a bank account
• Issue of debit/credit cards
• Cash deposit with a bank or post office during a day exceeding Rs.50,000
• Purchase of a bank draft or pay order in cash exceeding Rs.50,000 in a day
• A time deposit with banks, Nidhi, Non-Banking Financial Corporations (NBFCs), etc., exceeding Rs.50,000 or aggregating to more than Rs.2,50,000 during a financial year
• Payment for one or more prepaid payment instruments as defined by the Reserve Bank of India (RBI) through bank draft, pay order or banker's cheque aggregating to more than Rs.50,000 in a financial year
• All bank transactions exceeding Rs.10,000

Investment Transactions

• Purchase of mutual funds units

Business Transactions

• Sale or purchase of goods or services by any person more than Rs.2,00,000 per transaction

Reactivation of Inoperative PAN

However, the PAN can be made operative again in 30 days, upon intimation of Aadhaar number to the prescribed authority after payment of fee of Rs.1,000.

Key Takeaways

• Exempt Categories: Residents of J&K, Assam, Meghalaya, NRIs, super senior citizens (80+), and non-citizens are exempt
• Financial Impact: Higher TDS/TCS rates, no refunds, no Form 26AS credits
• Transaction Restrictions: Multiple banking, investment, and business transactions become impossible
• Reactivation: Possible within 30 days with Rs.1,000 fee after linking Aadhaar

Conclusion

The consequences of having an inoperative PAN due to non-linking with Aadhaar are severe and can significantly impact your financial activities. It's crucial to ensure timely PAN-Aadhaar linking to avoid these complications and maintain smooth financial operations.

For personalized guidance on PAN-Aadhaar linking and tax compliance, consult with a qualified Chartered Accountant who can help you navigate these requirements effectively.