Linking Pan Aadhaar: Not linking PAN with Aadhaar will cost you Rs 500 in the first 3 months, Rs 1,000 thereafter

The latest date for linking PAN to Aadhaar is March 31, 2022. If a person does not link their PAN to their Aadhaar number by this date, the penalty for linking it after April 1, 2022 will have a two-tier structure.

As per a notification issued by the Central Board of Direct Taxes (CBDT) on March 29, 2022, Rs 500 will be charged if the PAN-Aadhaar is bound within three months of the expiry of the deadline. This would mean that if PAN-Aadhaar is linked between April 1, 2022 and June 30, 2022, then the individual will be liable to pay Rs 500 as a penalty for linking the same. If the linking of PAN-Aadhaar is done after three months, a penalty of Rs 1,000 will be charged.

According to the published notification:
In exercising the powers conferred by sections 139AA and 234H read with section 295 of the Income Tax Act 1961 (43 of 1961), the Central Board of Direct Taxes makes the following rules for amending at new the Income Tax Rules of 1962, namely:-
1. Short title and effective date:- (1) These rules may be referred to as the Income Tax (Third Amendment) Rules, 2022.
(2) They come into force on April 1, 2022.
2. In the Income Tax Rules 1962 (hereinafter referred to as the main rules), in rule 114, after sub-rule 5, the following sub-rule is inserted, namely:-
“(5A) Any person who, pursuant to the provisions of subsection (2) of section 139AA, is
required to communicate his Aadhaar number to the prescribed authority in the prescribed form and manner, fails to do so on the date referred to in said subsection, shall, at the time of subsequent communication of his Aadhaar number to the prescribed authority prescribed, be liable, as a fee, for a sum equal to, –
(a) five hundred rupees, where such notice is given within three months from the date referred to in subsection (2) of Section 139AA; and
(b) one thousand rupees, in all other cases.”

The rule of levying a penalty for non-binding of PAN-Aadhaar by the due date (currently March 31, 2022) was introduced as an amendment to the Finance Act 2021. Section 234H has was introduced in the Income Tax Act 1961 for levying penalty for not linking PAN with Aadhaar after the due date. Previously, there was no law on the penalty charged if the two documents are not related to the due date.

Although the law mentions that the penalty for not linking PAN to Aadhaar will not exceed Rs 1,000, the exact amount has not been specified. The latest notification issued by the Income Tax Department specifies the penalty that will be charged for linking PAN to Aadhaar after the time expires.

What will happen if PAN-Aadhaar is not linked

Apart from the imposition of a penalty, if the PAN is not linked to Aadhaar by this due date, an individual’s PAN will become inoperative. Once the PAN becomes inoperative, an individual will no longer be able to carry out financial transactions, wherever the listing of the PAN is mandatory. These include investments in mutual funds, stocks, term deposits, etc. Many financial institutions such as banks, mutual funds, stock brokers are sending emails to their clients to remind them to link PAN to Aadhaar before the maturity date or else their mutual fund investments investments, bank accounts etc. will be frozen.

Note that the Income Tax Department can also impose a penalty under Section 272B up to Rs 10,000 for not having an active PAN.

How to link PAN with Aadhaar

The Income Tax Service offers various ways to link PAN to Aadhaar. These include on the electronic income tax filing portal, SMS, manually by visiting the NSDL/UTILI offices.

Also Read: How to Link PAN with Aadhaar

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