PAN Aadhaar link penalty

The Permanent Account Number (PAN) card and Aadhaar card are two important identification documents for Indian citizens. A PAN card is mainly used for financial transactions and tax-related purposes, while an Aadhaar card serves as proof of identity and address. To improve transparency and strengthen the financial system, the Government of India has made it mandatory to link PAN with Aadhaar.

Although the deadline for linking PAN and Aadhaar has been extended several times in the past, a penalty now applies if individuals and certain entities fail to complete the linking process within the prescribed time. This article explains the PAN-Aadhaar linking penalty and the steps you can take to avoid it.

Penalty for non-linking of PAN with Aadhaar card

The CBDT has set the PAN-Aadhaar link penalty at Rs. 1,000 as a late fee if individuals link PAN and Aadhaar after May 31st, 2024. Furthermore, it has also added a penalty of higher TDS/TCS collection. Individuals and entities who haven’t linked their PAN and Aadhaar cards must pay a higher TDS/TCS. If an individual is salaried, the employer is liable to deduct a higher TDS and deposit it with the Indian government. Furthermore, the PAN card will become inoperative if it hasn’t been linked with the Aadhaar card after May 31st, 2024.
 

Who must link PAN and Aadhaar?

As per Section 139AA(2A) of the Income Tax Act, every individual who was allotted a PAN on or before 1 July 2017 and is eligible to obtain an Aadhaar number is required to link the two in the prescribed manner.

This requirement applies to Indian citizens who file income tax returns, make investments, or carry out specified high-value financial transactions. Aadhaar–PAN linking is mandatory to ensure seamless tax compliance and financial reporting.

If an eligible individual fails to complete the PAN–Aadhaar linking, their PAN may become inoperative. An inoperative PAN can restrict access to essential tax-related services, including filing returns, processing refunds, opening bank accounts, and conducting certain financial transactions.

What will happen if Aadhaar and PAN are not linked?

If you fail to link your Aadhaar card and PAN card by May 31st, 2024, here are the consequences you may face:

• TDS/TCS will be deducted/collected at a higher rate.
• The PAN card will become inoperative after May 31st, 2024.
• Taxpayers will not be able to file their Income Tax Returns.
• The Income Tax Department will not process any pending returns, and taxpayers will not receive the pending refunds.
• Taxpayers will not be able to see their TCS/TDS certificates, and TDS/TCS credit will not be available on Form 26AS.
• Taxpayers will not be able to submit Form 15G/15H to avoid TDS payments.
• Individuals will not be able to use their PAN cards. Most financial activities will become unavailable, such as opening a bank account, purchasing mutual fund units, and bank transactions exceeding Rs. 10,000.
   

Circular on PAN-Aadhaar linking

The PAN and Aadhaar linking process is being supervised by the Central Board of Direct Taxes (CBDT). It has announced a PAN-Aadhaar link penalty for individuals and entities failing to link their PAN to their Aadhaar cards. As per CBDT, individuals and entities will be charged at a higher Tax Deducted at Source (TDS)/ Tax Collected at Source (TCS) rate if they fail to link their PAN card to their Aadhaar card by May 31st, 2024. It means that if you have not linked your PAN card to your Aadhaar card, you or your employer (in the case of salaried individuals) will be liable to deduct a higher TDS/TCS under sections 206AA and 206CC of the Income Tax Act, 1961.
 

This is because the Indian government announced that a PAN card that is not linked with an Aadhaar card will become inoperative after the last date. However, even after the last date, if you haven’t linked your PAN and Aadhaar, you can apply to link them after paying the Aadhaar-PAN link penalty.
 

The CBDT issued a circular on April 23rd, 2024, to resolve the complaints of deductors and collectors who had previously deducted and collected TDS/TCS at a regular rate. According to them, they received tax notices of "short-deduction/collection" of TDS/TCS due to such transactions. However, as the PAN had become inoperative of the person they deducted or collected the TDS/TCS from since April 1, 2023, they were required to deduct the TDS/TCS at a higher rate.
 

Addressing the issue, the CBDT issued a circular stating that for transactions entered into up to 31st March 2023—and in cases where PAN becomes operative on or before 31st May 2024 (as a result of PAN linkage with Aadhaar), the deductor or collector has no liability to deduct or collect tax u/s 206AA or 206CC.

Last date to link PAN with Aadhaar

The Indian government and the Central Board of Direct Taxes (CBDT) had set May 31st, 2024, as the last date to link the PAN and the Adhaar card. On June 1st, the PAN card will become inoperative, and the individuals or entities will be liable to pay the PAN-Aadhaar link penalty under sections 206AA and 206CC of the Income Tax Act, 1961.
 

Earlier, the date was set as March 31st, 2023, but it was extended to May 31st, 2024, to give Indian citizens and other entities more time.
 

How to pay late fee for Aadhaar-PAN linking?

Here is how you can pay the Aadhaar-PAN link penalty:

• Visit the official income tax filing website of the Indian government and navigate to the Aadhaar-PAN linking section.
• Submit the PAN-Aadhaar link request by selecting challan number ITNS 280.
• Go to the applicable tax mentioned under Major Head 0021 (Income Tax Other than Companies) and Minor Head 500 (Other Receipts).
• Select your preferred mode of payment and enter the required details, such as PAN number, address, and assessment year.
• Enter the show captcha and pay the PAN-Aadhaar link penalty.
• You will receive a receipt for the payment, and you can begin the process of linking your PAN and Aadhaar to avoid further consequences.
   

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

The Indian government has exempted certain individuals from linking their PAN and Aadhaar cards. These individuals are:

• Non-Resident Indians (NRIs): Individuals classified as NRIs per the Income Tax Act do not need to link their PAN with Aadhaar.
• Individuals not citizens of India: Foreign nationals, even if they hold a PAN, are exempt from linking it with Aadhaar.
• Super senior citizens: Individuals aged 80 years or above at any time during the previous year are exempt.
• Residents of Assam, Meghalaya, and Jammu & Kashmir: Individuals residing in these states are currently exempt from the PAN-Aadhaar linking requirement.

These exemptions are subject to change based on new regulations or government notifications, so it’s advisable to check for the most current information.

How to link PAN and Aadhaar

The Income Tax Department offers a simple online process to link PAN and Aadhaar. Follow these steps:

1. Visit the Income Tax e-filing portal.
2. Click on “Link Aadhaar” under “Quick Links” without logging in.
3. Enter your PAN, Aadhaar number, and name exactly as they appear in Aadhaar, then click “Validate”.
4. An OTP will be sent to your Aadhaar-registered mobile number. Enter the OTP to continue.
5. If you are linking PAN and Aadhaar after the prescribed deadline, pay a penalty of Rs. 1,000 through the e-Pay Tax facility.
6. Submit the application after completing the payment.
7. A confirmation message will appear on the screen. The updated status is usually reflected on the portal within 3–5 working days.

You can then check your PAN-Aadhaar link status on the portal to confirm that the linking process has been completed successfully.

Before starting the process, ensure that your Aadhaar details, including your registered mobile number, are up to date to enable OTP-based verification.

Importance of linking PAN with Aadhaar card

Here is the importance of linking your PAN with your Aadhaar card:
 

1. Avoiding PAN deactivation

Failure to link PAN with Aadhaar can result in the deactivation of your PAN. This means you cannot perform financial transactions that require a PAN number, such as opening a bank account, investing in securities, or buying property.

2. Filing income tax returns

A PAN card is mandatory to file ITRs and to get TDS/TCS refunds. Now, the Indian government has made it mandatory to link PAN with Aadhaar to file income tax returns.
 

3. Access to government services

Linking PAN with Aadhaar is often required to access various government services and subsidies. Thus, PAN-Aadhaar linking is vital to access such services and subsidies.
 

4. Reducing tax evasion

The Indian government can better monitor and track high-value transactions for citizens who have linked their PAN with Aadhaar. This can reduce tax evasion and ensure a transparent tax system.
 

5. Easy tax compliance

Linking PAN with Aadhaar allows for easier and more efficient tax compliance. It simplifies the process of issuing refunds, processing ITRs, and tracking financial transactions.
 

How to activate an inoperative PAN card and link it with an Aadhaar card?

If you have failed to link your PAN with Aadhaar and your PAN has become inoperative, you can easily activate it again by following the below steps:

Step 1: Visit the income tax e-filing portal.
 

Step 2: Navigate to the ‘Quick Links’ tab and click the ‘e-pay Tax’ option.
 

Step 3: Under ‘PAN/TAN,’ enter your PAN number and enter it again under the ‘Confirm PAN/TAN’ column. Enter your mobile number and click on the ‘Continue’ button.
 

Step 4: Enter the OTP received on your mobile number, and you will be redirected to a new e-pay tax page. Click the ‘Continue’ button here.
 

Step 5: Select ‘2025-26’ as the assessment year and select ‘Other Receipts (500)’ under the ‘Type of Payment (Minor Head). Select ‘Fee for delay in linking PAN with Aadhaar’ and click the ‘Continue’ button.
 

Step 6: You will see the PAN-Aadhaar link penalty amount under the ‘Others’ tab. Click on the ‘Continue’ button and pay the applicable fee.

How to pay late fees for Aadhaar-PAN linking

You can pay the late penalty on the Income Tax e-filing Portal using net banking, debit card, over the counter, NEFT/RTGS, or the payment gateway option. The payment gateway option is available if you have an account with the following authorised banks:

• Axis Bank
• Bank of Baroda
• Bank of India
• Bank of Maharashtra
• Canara Bank
• Central Bank of India
• City Union Bank
• Federal Bank
• HDFC Bank
• ICICI Bank
• IDBI Bank
• Indian Bank
• Indian Overseas Bank
• IndusInd Bank
• Jammu & Kashmir Bank
• Karur Vysya Bank
• Kotak Mahindra Bank
• Punjab & Sind Bank
• Punjab National Bank
• RBL Bank
• South Indian Bank
• State Bank of India
• UCO Bank
• Union Bank of India

After payment, link your PAN with Aadhaar immediately.

Conclusion

The Indian government has made linking PAN with Aadhaar mandatory, and the last date has been set as May 31st, 2024. As both PAN and Aadhaar cards are vital documents, it is important that you link them before the due date. If you fail to do so, you may be liable to pay the Aadhaar-PAN link penalty, and your PAN card will become inoperative, forcing you to lose most of your financial privileges. If you haven’t linked your PAN with an Aadhaar card, you can follow the above process to pay the PAN-Aadhaar link penalty and link them as soon as possible.

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