The deadline to link PAN with Aadhaar
is just a few days away, i.e., December 31. According to income tax
laws, if PAN is not linked with Aadhaar by this date, then your PAN will
become inoperative.
The government is yet to specify the meaning of the word 'inoperative' even though the rule regarding this was amended in the July 2019 Budget. The amendment had come into effect from September 1,
2019. According to the Budget 2019 documents, the law was amended to protect the validity of transactions previously carried out using PAN details.
Before this amendment, the law stated that if PAN was not linked with Aadhaar by the notified deadline, then PAN would become 'invalid'.
As the government is yet to define the word inoperative, here is what experts believe will happen if PAN is not linked with Aadhaar by the deadline of December 31.
What experts say if PAN becomes inoperative?
According to experts, the government is yet to clarify whether PAN can be re-activated after linking with Aadhaar after December 31 or an individual will have to re-apply for PAN once again.
Chartered Accountant Naveen Wadhwa, DGM, Taxmann.com says, "Though the rules related to PAN-Aadhaar linking came into effect from September 1, 2019, the government is yet to clarify the meaning of word inoperative and whether it will allow the individual to re-activate his/her PAN if not linked with Aadhaar by December 31 deadline. However, individuals must remember that if PAN is not linked then from January 1, 2020, they will not be able to do transactions where the quoting of PAN is mandatory."
Individuals must remember that if PAN is not linked with Aadhaar, then it will be deemed as he/she is not holding PAN.
Abhishek Soni, CEO and Founder, Tax2win.in, an ITR filing website says, "It is mandatory to link PAN with Aadhaar by December 31, 2019. The consequence of not linking the same will make the PAN inoperative. This would mean that an individual will not be able to use the PAN to do financial transactions. Further, it will be deemed that he/she is not holding a PAN."
Also, due to non-availability of PAN, you will be subject to higher tax rate.
Homi Mistry, Partner, Deloitte India says, "Any PAN which is not linked to Aadhaar will become inoperative w.e.f. 1 January 2020. This means that you will not be able to use the PAN already allotted to you for filing income tax returns (ITR), paying taxes, etc. Further, you could be subject to a higher rate of tax for non-availability of PAN. However, the PAN will not be invalidated retrospectively."
Though the government has notified PAN-Aadhaar inter-changeability rules, experts suggest that clarity is needed if an individual can quote Aadhaar number to do financial transactions once the PAN becomes inoperative.
Soni says, "The government has notified the PAN-Aadhaar inter-changeability rules which allow individuals to use Aadhaar number where PAN is not available. However, further clarity is needed on it whether Aadhaar number can be used to do transactions where PAN has become inoperative. In our view, it is likely that the individual will not be able to do the financial transaction."
According to income tax laws, Aadhaar number in lieu of PAN can be used if the individual does not have PAN or if PAN is linked to Aadhaar.
Wadhwa says, "It is unlikely that the government will allow an individual to quote Aadhaar number to do the transactions once the PAN becomes inoperative. The reason being Aadhaar number in lieu of PAN can be quoted in two situations - (a) Where PAN has not been obtained and (b) Where PAN and Aadhaar are linked. However, further clarity is needed in such situations from the government."
If Aadhaar number can be used to conduct transactions once PAN becomes inoperative, clarity is needed whether second PAN will be issued or not.
Mistry says, "There is yet no guidance from the tax authorities on using Aadhaar number to do transactions once PAN becomes inoperative. However, the government had clarified earlier this year that anyone who quotes an Aadhaar number for any financial transaction will be deemed to have made an application for PAN. Hence, there is a possibility that a fresh PAN may be allotted to you. Having multiple PANs is an offence punishable under the Income tax laws with a penalty of Rs10,000. It is not clear whether such a penalty will be invoked for an individual in case a second PAN is allotted to him after his first PAN is rendered invalid, for failure to link it to Aadhaar."
Will the deadline to link PAN-Aadhaar get extended?
Wadhwa says, "As, the government has not notified the rules regarding PAN-Aadhaar linking, therefore, it is likely that the deadline to link PAN with Aadhaar will be extended to avoid the confusion. However, it is suggested that to link the same as soon as possible."
So if you still have not linked your PAN with Aadhaar, read this story to know how you can do it.
The government is yet to specify the meaning of the word 'inoperative' even though the rule regarding this was amended in the July 2019 Budget. The amendment had come into effect from September 1,
2019. According to the Budget 2019 documents, the law was amended to protect the validity of transactions previously carried out using PAN details.
Before this amendment, the law stated that if PAN was not linked with Aadhaar by the notified deadline, then PAN would become 'invalid'.
As the government is yet to define the word inoperative, here is what experts believe will happen if PAN is not linked with Aadhaar by the deadline of December 31.
What experts say if PAN becomes inoperative?
According to experts, the government is yet to clarify whether PAN can be re-activated after linking with Aadhaar after December 31 or an individual will have to re-apply for PAN once again.
Chartered Accountant Naveen Wadhwa, DGM, Taxmann.com says, "Though the rules related to PAN-Aadhaar linking came into effect from September 1, 2019, the government is yet to clarify the meaning of word inoperative and whether it will allow the individual to re-activate his/her PAN if not linked with Aadhaar by December 31 deadline. However, individuals must remember that if PAN is not linked then from January 1, 2020, they will not be able to do transactions where the quoting of PAN is mandatory."
Individuals must remember that if PAN is not linked with Aadhaar, then it will be deemed as he/she is not holding PAN.
Abhishek Soni, CEO and Founder, Tax2win.in, an ITR filing website says, "It is mandatory to link PAN with Aadhaar by December 31, 2019. The consequence of not linking the same will make the PAN inoperative. This would mean that an individual will not be able to use the PAN to do financial transactions. Further, it will be deemed that he/she is not holding a PAN."
Also, due to non-availability of PAN, you will be subject to higher tax rate.
Homi Mistry, Partner, Deloitte India says, "Any PAN which is not linked to Aadhaar will become inoperative w.e.f. 1 January 2020. This means that you will not be able to use the PAN already allotted to you for filing income tax returns (ITR), paying taxes, etc. Further, you could be subject to a higher rate of tax for non-availability of PAN. However, the PAN will not be invalidated retrospectively."
Though the government has notified PAN-Aadhaar inter-changeability rules, experts suggest that clarity is needed if an individual can quote Aadhaar number to do financial transactions once the PAN becomes inoperative.
Soni says, "The government has notified the PAN-Aadhaar inter-changeability rules which allow individuals to use Aadhaar number where PAN is not available. However, further clarity is needed on it whether Aadhaar number can be used to do transactions where PAN has become inoperative. In our view, it is likely that the individual will not be able to do the financial transaction."
According to income tax laws, Aadhaar number in lieu of PAN can be used if the individual does not have PAN or if PAN is linked to Aadhaar.
Wadhwa says, "It is unlikely that the government will allow an individual to quote Aadhaar number to do the transactions once the PAN becomes inoperative. The reason being Aadhaar number in lieu of PAN can be quoted in two situations - (a) Where PAN has not been obtained and (b) Where PAN and Aadhaar are linked. However, further clarity is needed in such situations from the government."
If Aadhaar number can be used to conduct transactions once PAN becomes inoperative, clarity is needed whether second PAN will be issued or not.
Mistry says, "There is yet no guidance from the tax authorities on using Aadhaar number to do transactions once PAN becomes inoperative. However, the government had clarified earlier this year that anyone who quotes an Aadhaar number for any financial transaction will be deemed to have made an application for PAN. Hence, there is a possibility that a fresh PAN may be allotted to you. Having multiple PANs is an offence punishable under the Income tax laws with a penalty of Rs10,000. It is not clear whether such a penalty will be invoked for an individual in case a second PAN is allotted to him after his first PAN is rendered invalid, for failure to link it to Aadhaar."
Will the deadline to link PAN-Aadhaar get extended?
Wadhwa says, "As, the government has not notified the rules regarding PAN-Aadhaar linking, therefore, it is likely that the deadline to link PAN with Aadhaar will be extended to avoid the confusion. However, it is suggested that to link the same as soon as possible."
So if you still have not linked your PAN with Aadhaar, read this story to know how you can do it.
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