Not Linking PAN With Aadhaar: Consequences Beyond Rs 10,000 Penalty

If you have been putting off linking your PAN with Aashaar, the obvious concern is typically the Rs 10,000 penalty. But the bigger issue is not just the fine, it is how an inoperative PAN can throw a spanner into your everyday financial tasks.

The Income Tax Department has been steadily pushing for compliance. Over 17 crore PAN cards were on the radar to be marked inoperative if not linked with Aadhaar. And while the deadline (which was earlier extended until June 30, 2023) has come and gone, the impact still matters, especially for those who have forgotten about it, thinking they are in the clear.

More Than Just a Fine

Yes, there’s a penalty. As per Section 272B of the Income Tax Act, a Rs 10,000 fine can be imposed if you quote an inoperative PAN where it is required. But this is just the start. The real trouble begins when your PAN is considered “not furnished” in official terms.

And that has consequences.

You Can't Use PAN Where It’s Needed Most

Once inoperative, your PAN is basically unusable. It is as though it doesn’t exist. So in places where quoting a PAN is mandatory, like buying property, investing in mutual funds, or opening certain kinds of bank accounts, you could be denied access.

That also includes filing your income tax return. If your PAN is not active, you won’t be able to file at all. That might not sound like a big deal if you don’t owe tax, but what if you want to claim a refund? Or show proof of income for a visa or a loan? You are stuck.

Says Suresh Surana, a Mumbai-based chartered accountant, “As per Rule 114 AAA of the Income-tax Rules, 1962, taxpayers who were allotted a PAN on or before July 1, 2017, and are required to link it with their Aadhaar under Section 139AA(2), must have done so by March 31, 2022 (extended to 30th June 2023). If the aadhar is not linked with PAN, then the PAN would become inoperative. Quoting inoperative PAN shall be treated as non-furnishing of PAN for specified transactions, where PAN is required to be quoted (Purchase of Property / Purchase of Mutual funds / furnishing of tax return, etc). There is also a penalty of Rs 10,000 prescribed under section 272B which could be levied by the income tax authorities.”

Refunds Get Stuck Too

And this is something many taxpayers don’t realise: the Income Tax Department won’t process any tax refund if your PAN isn’t linked with Aadhaar. Even if the refund is due, it’ll just sit there. No money comes in—and no interest gets paid for the delay, either.

Senior Citizens: A Grey Area

This is particularly relevant for senior citizens who may have stopped filing returns after retirement, assuming they don’t need to anymore. But if there’s any need to file, say, to report exempt income or claim back TDS, a non-linked PAN will block it.

It is also worth noting that those aged 80 and above during the financial year are exempt from the PAN-Aadhaar linking requirement. However, if you are 60 or 70 and have not linked it yet, you are still expected to comply.

What Happens If You Are Late?

The good news here is that if you have missed the deadline, you can still link your PAN with Aadhar by paying the late fee of Rs 1,000.

Adds Surana, “If the Aadhaar is subsequently linked after the deadline, and the fee is duly paid, the PAN will become operative within 30 days of Aadhaar submission. During the period in which the PAN remains inoperative, significant consequences apply such as no income tax refund will be processed and no interest will be paid on any delayed refund.”