Income Tax Department has issued an advisory for taxpayers regarding the status of their Permanent Account Number (PAN). If your PAN card is marked as “inoperative,” you could face significant financial consequences. Let’s delve into the details and understand what this means for taxpayers.
What Does “Inoperative” PAN Mean?
An inoperative PAN refers to a situation where an individual has failed to link their PAN with their Aadhaar number as required by law. The consequences of having an inoperative PAN are far-reaching and can impact various aspects of your financial life.
Consequences of an Inoperative PAN
Here are the key repercussions faced by individuals with an inoperative PAN:
- Refund Restrictions:
- If you are eligible for a tax refund, having an inoperative PAN means that you won’t receive any refund amount.
- This restriction applies to any tax or part thereof due under the provisions of the Income Tax Act.
- Interest Exclusion:
- Interest on any eligible refund will not be paid during the period when your PAN remains inoperative.
- The interest accrual starts from the date specified under sub-rule (4) of rule 114AAA and continues until your PAN becomes operative again.
- Higher TDS (Tax Deducted at Source):
- For individuals subject to tax deduction under Chapter XVJJ-B, the TDS rate will be higher.
- Section 206AA mandates this higher rate for those with an inoperative PAN.
- Higher TCS (Tax Collected at Source):
- Similarly, individuals subject to tax collection at source under Chapter XVJJ-BB will face a higher TCS rate.
- Section 206CC governs this provision.
Effective Date and Fee
- These consequences take effect from 1st July 2023 and continue until your PAN becomes operative.
- To reactivate your PAN, you must intimate your Aadhaar number and pay a fee of one thousand rupees.
Exemptions
Not everyone is affected by these consequences. Individuals who have been granted an exemption from linking their Aadhaar number under sub-section (3) of section 139AA of the Income Tax Act are spared from the inoperative PAN penalties.
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