For all new PAN issued as on 1st July 2017, CBDT made it mandatory for all individuals to link their PAN with the Aadhaar. The last date for taking action was extended quite a few times. However, on and from 1st July 2023, all unlinked PAN with Aadhaar has been marked as ‘Inoperative’ with the following consequences:
- ITR cannot be filed
- Pending Returns will not be processed
- Pending Refunds will not be issued
- TDS / TCS will attract the higher rate (similar to not having a PAN)
As the impact has also been on TDS & TCS, Tax Deductors & Collectors have been receiving ‘Default Notices’ for lower deduction / collection of taxes for ‘Inoperative’ PANs as reported in the TDS / TCS Returns. One can check the PAN status by logging into TRACES.
Note:
Although, no official documentation is available, it has been observed that even after the ‘Inoperative’ status of the PAN has been rectified, if the ‘Date’ of the ‘Transaction’ falls within 1st July 2024 and the date of rectification in the ‘Inoperative’ status, TDS at higher rate would be applicable. The IT Department through TRACES does not disclose the date on which the ‘Inoperative’ status was rectified. Owing to this reason, many Tax Deductors / Collectors are still getting ‘Default Notices’ despite the PAN being valid and operative.
Remedies:
- Tax Deductors / Collectors have to ensure all PANs reported in the quarterly TDS Statements are ‘Valid’ and should not be ‘Inoperative’. This needs to be checked before submission.
- The ‘Inoperative’ PAN Holder has to take steps to link their Aadhaar with their PAN as per the guidelines by paying the appropriate fee. Initially, there was no charges which was subsequently increased to Rs. 500 and is currently Rs. 1,000. This is mandatory for all individual PAN holder.
- The ‘Default Notices’ received needs to be addressed by filing appropriate ‘Correction Statements’ after necessary corrective steps have been taken.
TDSMAN has appropriately addressed the ‘Inoperative’ PAN validation for all PANs being reported within the quarterly TDS Statement or Correction Statement. This would effectively help in preventing errors and future ‘Default Notices’