IT Dept's Crackdown on Inoperative PANs: Here's What Seniors Should Know

The reports of crackdown by the Income Tax Department on inoperative PANs raises fresh questions, and some anxiety, for the senior citizens. Many retirees, particularly those whose income falls below the taxable threshold, may have quietly stopped filing their income tax returns over the years. But that does not mean they can ignore the latest updates.

If your PAN is not linked to Aadhaar, it could be flagged as inoperative, and using it, even unknowingly, can result in a penalty of Rs 10,000 per financial transaction.

Why This Matters Even If You Don't File ITR

For Assessment Year 2025–26 under the new regime, individuals above 60 years of age are not required to file ITRs if their total income is below Rs 3 lakh. But a PAN card is not just about filing taxes. It's tied to a wide range of financial transactions, many of which senior citizens routinely engage in.

Says CA Suresh Surana, "According to news reports, over 17 crore PAN cards were flagged to become inoperative if not linked with Aadhaar. Though the deadline for Aadhar-PAN has since passed, the underlying implications still hold relevance for all PAN holders, including senior citizens, especially those who may have discontinued filing Income Tax Returns (ITRs) due to income falling below the taxable threshold."

"Even if you're not filing returns, PAN is still needed for fixed deposits, Senior Citizens' Savings Scheme (SCSS), mutual fund redemptions, demat accounts, and property transactions," he adds.

If your PAN is inoperative, banks and financial institutions may treat it as a non-furnishing PAN, and that's where the penalty risk kicks in.

Where the Penalty Can Hit

According to CA Ashish Niraj, Partner at A S N & Company, quoting an inoperative PAN for prescribed transactions can attract a penalty under Section 272B of the Income Tax Act. The fine is Rs 10,000 per instance, whether it is an FD renewal, mutual fund switch, or buying property.

So, even if a senior citizen is not earning taxable income, using an inoperative PAN can still trigger penalties.

"The law doesn't differentiate based on income when it comes to PAN-Aadhaar linking. Unless you fall in an exempt category, such as those aged 80 and above, you must comply," Niraj explains.

Are There Any Exemptions?

Yes, but they are specific. You do not need to link PAN with Aadhaar if you are:

• Aged 80 or above during the financial year

• A resident of Assam, Jammu & Kashmir, or Meghalaya

• A non-resident under the Income-tax Act

• Not a citizen of India

For everyone else, the PAN-Aadhaar link is mandatory, regardless of income.

Can the Penalty Be Waived?

Explains CA Niraj, "If we check the wording of Section 272B then its clause 1 states that If a person fails to comply with the provisions of section-139A, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees. Clause 3 states that No order under sub-section (1) or sub-section (2) or sub-section (2A) or sub-section (2B) shall be passed unless the person, on whom the penalty is proposed to be imposed, is given an opportunity of being heard in the matter."

He notes that as clause 1 has the word "may" therefore it may be implied that it is not compulsory and at the discretion of AO. If AO is satisfied that the senior citizen was seriously not aware of the requirement, he may not impose a penalty.

That said, it's a grey area. Avoiding the situation altogether by ensuring your PAN is active remains the safest route.

How to Check and Link Your PAN

Even if you have not filed a return in years, it is important to check the status of your PAN. You can check it on the income tax e-filing portal.

If your PAN is not linked, the portal allows you to complete the Aadhaar linking in a few steps. A late fee may apply (around Rs 1,000) but that is far better than facing multiple penalties.

"Linking now will also help avoid future disruption in case a senior citizen needs to file for refund, sell property, or disclose capital gains," says Surana.

Even if a senior citizen is exempt from filing returns, in what types of financial activities could they still require a valid PAN? (for instance, interest income above Rs 40,000 (TDS), sale of property, claiming TDS refund, investing in SCSS or mutual funds?)

According to CA Niraj as per Rule 114B of Income Tax Rules 1962, Valid PAN is compulsory for transactions such as:

• Sale/ Purchase of Immovable Property exceeding Rs 10 Lacs

• Sale Purchase of Motor Vehicle except two wheeler.

• FD Exceeding Rs 50,000.

• For Making application for credit card

• Demat Account

• Hotel bill payment exceeding Rs 50,000 in cash

• MF/Debenture/Bonds etc exceeding Rs 50,000

• Others

Many seniors assume that if they don't need to file taxes, their PAN does not need attention. That assumption could now cost money. Staying alert to your PAN status, and keeping it linked to Aadhaar, is just as important in retirement as it was during working years.