What are the consequences of PAN becoming inoperative due to non-linkage to Aadhaar?

financialexpress.com:

Question: What are the consequences of PAN becoming inoperative due to non-linkage to Aadhaar? Any further clarifications from the government in this regard?

Answer given by Dr. Suresh Surana, Founder, RSM India: As per the Rule 114AAA of the Income Tax Rules, 1962 (‘the Rules’), the taxpayers who have failed to intimate their Aadhaar, shall be liable to face the following consequences as a result of their PAN becoming inoperative:

(i) Refund of any amount of tax or part thereof, due under the provisions of the Income-tax Act (‘Act’), shall not be granted.

(ii) Interest shall not be payable on such refund for the period during which the PAN remains inoperative.

(iii) Tax shall be deducted at source (‘TDS’) at higher rate, in accordance with the provisions of section 206AA of the Act.

(iv) Tax shall be collected at source (‘TCS’) at higher rate, in accordance with the provisions of section 206AA of the Act.

Also Read: Old vs New Tax Regime: Who should move to the New Tax Regime from the old one?

Circular No. 3 of 2023 detailed various consequences of PAN becoming inoperative, including deduction or collection of tax at source (‘TDS’/ ‘TCS’) at higher rate in accordance with the provisions of section 206AA or 206CC of the Act, as the case may be.

Circular No. 3 of 2023 dated 28 March 2023 clarified that the above listed consequences will be effective from 1 July 2023 and shall continue till PAN becomes operative (within 30 days from the date of intimation of Aadhaar). A fee of Rs 1000 would apply to make the PAN operative by intimating the Aadhaar number.

In this regard, various taxpayers had raised grievances that they were in receipt of notices alleging default of ‘short deduction/ collection’ of TDS/TCS while