PAN & Aadhaar Impact on Income Tax Filing
The Permanent Account Number (PAN) and Aadhaar Card are crucial identification documents for taxpayers in India. They play a significant role in tax compliance, financial transactions, and government verification processes. The recent Income Tax Bill 2025 has reinforced their importance with updated rules. This blog covers the essentials, recent changes, and their impact on taxpayers.
What is PAN?
PAN (Permanent Account Number) is a 10-digit alphanumeric identifier issued by the Income Tax Department of India. It is primarily used for:
- Filing income tax returns (ITR)
- Opening bank accounts
- Buying or selling assets above specified limits
- Conducting high-value financial transactions
- Applying for loans and credit cards
What is Aadhaar?
Aadhaar is a 12-digit unique identification number issued by the Unique Identification Authority of India (UIDAI). It serves as proof of identity and address and is widely used for availing government benefits, financial services, and e-KYC verification.
PAN-Aadhaar Linkage & Its Importance
The Indian government has made linking PAN with Aadhaar mandatory to:
- Reduce tax evasion and prevent duplicate PANs
- Ensure accurate taxpayer identification
- Facilitate smooth e-verification of ITR
How to Link PAN with Aadhaar?
- New applicants of PAN card: The Aadhaar PAN linking is done automatically during the application stage.
- Existing PAN holders: The existing PAN holders who were allotted PAN on or before 01-07-2017 it is mandatory to link PAN with Aadhaar. The Link Aadhaar service is available to individual taxpayers (both registered and unregistered) on e-Filing Portal.
Taxpayers who have been allotted a PAN as on 1st July 2017 and are not exempted from linking are liable to pay a non-refundable fee of Rs. 1000 for submission of PAN-Aadhaar linkage request. If linking is not done till 30th June 2023, the PAN will be marked as inoperative with effect from 1st July 2023.
Is there any exemption for PAN-Aadhaar linkage:
Following categories are exempted from Aadhaar-PAN linking
- NRIs
- Not a citizen of India
- age > 80 years at any time during the previous year
- state of residence is ASSAM, MEGHALAYA or JAMMU & KASHMIR
Income Tax Bill 2025: Key Updates on PAN and Aadhaar
The Income Tax Bill 2025 has introduced new regulations regarding the mandatory quoting and linking of PAN and Aadhaar:
- When is Aadhaar mandatory: Every person who is eligible to obtain Aadhaar number shall quote such number in the application form for allotment of Permanent Account Number and in the return of income.
- When is PAN mandatory: Every individual is required to mention their Permanent Account Number (PAN) in all income tax returns, correspondence with any income-tax authority, and on all challans for payment under the Income Tax Act 2025.
- Mandatory Quoting: Aadhaar and PAN must be quoted for tax-related transactions, including filing returns, bank deposits over ₹50,000, property purchases, and high-value investments.
- PAN Inoperability: If not linked with Aadhaar, PAN becomes inoperative, leading to restrictions on financial transactions and higher TDS/TCS deductions.
- Aadhaar as an Alternative to PAN: Under certain conditions, Aadhaar can be used instead of PAN for tax compliance.
- Higher TDS/TCS Deduction: Failure to quote PAN or Aadhaar in specified transactions can attract higher rates of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS).
Consequences of Not Linking PAN with Aadhaar
If PAN is not linked with Aadhaar by the prescribed deadline, the following consequences apply:
- PAN Becomes Inoperative: In such cases, taxpayers cannot file ITR, process refunds, or conduct financial transactions requiring PAN.
- Higher Tax Deduction: Transactions may attract higher TDS/TCS rates as per Section 206AA of the Income Tax Act.
- Banking and Investment Restrictions: Certain banking and investment activities may be blocked.
PAN-Aadhaar Interchangeability
The government allows PAN-Aadhaar interchangeability for select transactions, meaning taxpayers can use Aadhaar instead of PAN. However, linking both remains essential for seamless compliance with tax laws.
FAQs
Can I file my ITR without linking PAN and Aadhaar
No, the Income Tax Department requires PAN and Aadhaar to be linked for ITR processing.
What happens if I have two PAN cards
Holding multiple PANs is illegal and may result in penalties. You should surrender any duplicate PAN immediately.
Is Aadhaar mandatory for NRIs
No, Aadhaar is not mandatory for NRIs. However, if they possess an Aadhaar card, they should link it with PAN for compliance.
How can I check if my PAN is active?
You can check your PAN status on the Income Tax Department’s official website using your PAN number.
Can I apply for a duplicate PAN if I lose my original?
Yes, you can apply for a duplicate PAN through the NSDL or UTIITSL portal. The PAN number will be same and new card with same PAN number will be issued.
Can I apply for a new PAN number in case change in my name?
No, you cannot apply for a new PAN number. Once PAN is issued there will be no change in PAN number for forever. You can simply update the name and other records like address, email, mobile etc. in your existing PAN records. The PAN number will be same and other things will be changed.
Can I file an income tax return without a PAN card?
If you want to file your Income Tax Return in India, you have to register yourself at Income Tax Portal. For registering on the portal, you have to provide your PAN number. Hence the PAN is mandatory and you cannot file income tax return without PAN.
PAN & Aadhaar Impact on Income Tax Filing in 2025:
With the latest updates in the Income Tax Bill 2025, PAN and Aadhaar linkage has become more significant. Ensuring compliance with the new rules will prevent financial and legal complications. Stay updated and take the necessary steps if needed. You can connect with us by dropping you name, mail and number at Taxunplug for all you tax need.