Linking your PAN (Permanent Account Number) with your Aadhaar card is mandatory in India. However, link these two important identification documents before the deadline to avoid significant consequences. The deadline for linking PAN with Aadhar was June 30; it may be extended. If you miss this deadline, your PAN will become inoperative from July 1. Any one of you is facing this issue? This financial news explores the implications of not linking PAN with Aadhaar and how it can affect your financial transactions and tax obligations.
Table of Contents
1.What are PAN and Aadhaar
2. Link PAN with Aadhaar - Importance
3. Consequences of Not Linking PAN with Aadhaar
- 3.1 Inoperative PAN
- 3.2 Impact on Financial Transactions
- 3.3 Higher Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)
4. Financial Transactions Allowed with an Inoperative PAN
- 4.1 Receiving Interest Income from Bank Fixed Deposits
- 4.2 Receiving Dividends from Companies and Mutual Funds
- 4.3 Selling Immovable Property
- 4.4 Buying a Car
- 4.5 Withdrawing Money from EPF Account
- 4.6 Paying Rent to Landlord
- 4.7 Selling Goods and Services
- 4.8 Making Payments for Contract Work
- 4.9 Receiving Commission or Brokerage Payments
5. Common Financial Transactions and Their Impact
6. TCS Rates for Foreign Remittances and Overseas Tour Programs
PAN Card Link With Adhaar?
The Government of India (GOI) introduced the Aadhaar card as a unique identification document that serves as proof of ID and address ID for Indian residents. On the other hand, PAN is a ten-digit alphanumeric number issued by the Income Tax Department. The purpose of linking PAN with Aadhaar is to ensure seamless integration of these two important identification systems and curb tax evasion.
What are PAN and Aadhaar?
Permanent Account Number (PAN) is a unique and individual identification number given to persons and entities in India to track their financial transactions and tax obligations. Aadhaar, on the other hand, is a biometric-based identification system that assigns a unique 12-digit number to Indian residents.
Importance of Linking PAN with Aadhaar
Linking PAN with Aadhaar is crucial for various reasons. It helps the government identify individuals and ensure they are not evading taxes. The linkage also helps eliminate duplicate or fake PANs and curb the misuse of PAN cards for fraudulent activities.
Consequences of Not Linking PAN with Aadhaar
If you fail to link your PAN with Aadhar before the deadline, your PAN will become inoperative. An inoperative PAN means it cannot be used for financial transactions and other purposes.
Impact on Financial Transactions
With an inoperative PAN, you won't be able to undertake certain financial transactions. These include investing in bank fixed deposits, mutual fund schemes, and other financial instruments. Moreover, you will not be able to file income tax returns or claim a tax refund.
Higher Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)
Sections 206AA and 206CC of the Income Tax Act of 1961 mandate higher tax deductions and tax collections at source if a PAN does not exist or is inoperative. In such instances, the tax deductor or payer of the income is required to deduct tax at a higher rate, usually 20%, as provided by the Income Tax Act. Similarly, the TCS rate for the non-furnishing of a PAN or furnishing of a non-operative PAN is twice the stipulated rate or 5%, whichever is greater.
Financial Transactions Allowed with an Inoperative PAN
Despite having an inoperative PAN, there are certain financial transactions that you can still perform. However, it is important to note that these transactions will attract higher tax deductions and collections at source.
Receiving Interest Income from Bank Fixed Deposits (FD)
If the total interest income from bank fixed deposits or recurring deposits (RD)exceeds Rs 40K (Rs 50K for senior citizens) in a financial year, higher TDS will be applicable.
Receiving Dividends from Companies and Mutual Funds
Receiving dividends from companies and mutual funds exceeding Rs 5,000 in a financial year will also attract higher TDS.
Selling Immovable Property
In the case of selling immovable property, if the sale value or stamp duty value exceeds Rs 50 lakh per transaction, the transaction will be subject to higher TDS.
Buying a Car
A higher TDS will be applicable if the amount spent on buying a car exceeds Rs 10 lakh.
Withdrawing Money from EPF Account
If the withdrawal from an EPF (Employee Provident Fund) account exceeds Rs 50,000 per month and TDS is applicable, higher TDS will be deducted.
Paying Rent to Landlord
A higher TDS will be deducted if your monthly rental payment to a landlord exceeds Rs 50K.
Selling Goods and Services
Selling goods and services where the transaction amount exceeds Rs 50 lakh per transaction will attract higher TDS.
Making Payments for Contract Work
For payments made for contract work, if the amount exceeds Rs 30,000 for a single contract or Rs 1 lakh in total, higher TDS will be deducted.
Receiving Commission or Brokerage Payments
Receiving commission or brokerage payments exceeding Rs 15,000 will attract higher TDS.
Common Financial Transactions and Their Impact
The above-mentioned financial transactions are common occurrences in an individual's daily life. It is important to know the implications of an inoperative PAN and the associated higher tax deductions and collections at the source.
TCS Rates for Foreign Remittances and Overseas Tour Programs
Under the Liberalised Remittance Scheme (LRS), the TCS rate for foreign remittances above Rs 7 lakh is 20%, except for education and medical expenses. Additionally, for the purchase of an overseas tour program up to Rs 7 lakh from October 1, 2023, the TCS rate would be 5%. For amounts above Rs 7 lakh, the TCS rate would be 20%. These TCS rates are applicable even if an individual has an inoperative PAN.
What happens if I don't link my PAN with Aadhaar?
If you don't link your PAN with Aadhaar, your PAN will become inoperative, and you won't be able to undertake certain financial transactions and file income tax returns.
Can I still perform financial transactions with an inoperative PAN?
You can still perform certain financial transactions, but they will attract higher tax deductions and collections at the source.
What are the consequences of not linking PAN with Aadhaar?
The consequences include an inoperative PAN, restrictions on financial transactions, and higher tax deductions and collections at the source.
Can I claim a tax refund with an inoperative PAN?
No, you won't be able to claim a tax refund with an inoperative PAN.
How can I link my PAN with Aadhaar?
Visit the official income tax e-filing portal or use the UIDAI (Unique Identification Authority of India) website to know about How to link PAN with Aadhaar.