CBDT Clarifies Consequences of Inoperation of PAN as per New Substituted Rule 114AAA w.e.f. July 1, 2023 [Read Circular]

With effect from July 1, 2023, the Central Board of Direct Taxes (CBDT)’s Circular No. 03 of 2023, dated March 28, 2023, details the ramifications of not linking PAN and Aadhar.

The implications will start on July 1, 2023, and last until the PAN is operational. To make the PAN active by notifying the Aadhaar number, a cost of Rs. 1000 would still be charged.

Following the substitution of rule 114AAA of the Income-tax Rules, 1962 (the Rules) by notification no. 15 of 2023 dated March 28, 2023, it is hereby made clear that a person who has failed to notify the Aadhaar number in accordance with section 139AA of the Income-tax Act, 1961 (the Act) read with rule 114AAA shall suffer the following consequences as a result of his PAN becoming invalid:

1. refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made to him;
2. interest shall not be payable to him on such refund for the period, beginning with the date specified under sub-rule (4) of rule 114AAA and ending with the date on which it becomes operative;
3. where tax is deductible under Chapter XVJJ-B in case of such person, such tax shall be deducted at higher rate, in accordance with the provisions of section 206AA;
4. where tax is collectible at source under Chapter XVJJ-BB in case of such person, such tax shall be collected at a higher rate, in accordance with the provisions of section 206CC.

Those who have been given an exemption from notifying their Aadhaar number under the terms of sub-section (3) of section 139AA of the Act are not subject to the effects of PAN becoming inoperative.

Linking an individual’s Aadhaar and PAN numbers is the process of combining their PAN and Aadhaar numbers. According to an order from the government, this linkage is required for all Indian taxpayers.

Recently, the CBDT notified that they had extended the deadline to link PAN Card and  Aadhar to June 30, 2023. It was stated that more than 51 crore PANs have already been linked with Aadhaar till date.

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