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Linking Of Adhaar And PAN: Implications Under Income Tax Act 1961

In a circular released by CBDT (Central Board of Direct Taxes) on March 30, 2022, it is stated that everyone with a valid PAN and Adhaar must link their PAN with their Adhaar. Any noncompliance would be detrimental to the person and render the PAN useless.
Person Eligible to link Adhaar and PAN

According to Section 139AA of the Income Tax Act of 1961, every person who had a permanent account number as of July 1, 2017, and who was qualified for an Adhaar number, was required to notify his Adhaar number in the manner prescribed by law. By March 31st, 2023, these people must compulsorily link their Adhaar and Pan numbers.

Who is exempt from the PAN-Adhaar Link

Anyone who is one of the following is exempt from the link requirement:
  • Any person who has reached the age 80 or above it.
  • A person who is non-resident stated in Income Tax Act 1961.
  • A individual who does not hold Indian citizenship
  • Any individual resides in the states of Jammu Kashmir , Assam and Meghalaya.
But if anyone fall under this category, other than who is not an Indian citizen, wants to voluntarily link their Adhaar and PAN, they can do so by paying the amounts as per mentioned by the Income Tax Department.

What would happen if someone didn't link their Adhaar-PAN?
All tax payers have been requested by the CBDT to connect their PAN with their Adhaar by March 31, 2023, and if they fails to do so , their PAN would become inoperative as stipulated in the subsection(2) of Section 139AA, and they will be required to pay a price specified by the Act.

When a person's Permanent Account Number becomes invalid:

  • They are not permitted to file an income tax return.
  • A PAN that is not active cannot receive pending refunds.
  • The defective returns cannot be placed in pending processes.
  • A higher rate of tax will be deducted.
As stated in the subsection(3) of section 114AAA of the Income Tax Act 1961.

SEBI guidelines for PAN-Adhaar Link

For frictionless transactions in the securities market, SEBI, the capital market regulator, instructed all investors to link Adhaar-PAN.

The PAN is the primary identification number and a component of the KYC criteria for all transactions, All SEBI registered organizations, market infrastructure institutions, and investors to ensure valid KYC for all participants, according to SEBI. Additionally, it is imperative that investors who have Demat accounts make sure their PANs are linked to their Adhaar cards.

Methods of Linking

Adhar and PAN can be linked through online portal or even through message services. Using SMS method, one can link their cards by sending a message on numbers 567678 or 56161. Format to be followed is to mention the UIDPAN space your 12 digits adhar number space 10 digit PAN number. (UIDPAN ADHAR NUMBER PAN NUMBER). Another method is through online portal where a fees has to be submitted on NSDL portal and a simple link request has to be made.Documents required are Adhar card PAN card and the mobile number as linked with Adhar card.

What led to the government's decision to link Pan and Adhaar?

The Income Tax Department has observed situations in which one person received more than one pan allocation and one PAN was assigned to more than one person.

It was required for a taxpayer who is eligible to receive Adhaar to include his Adhaar in the application form for PAN and return of income in order to have a preventative method of duplication of the PAN database.

Some people believe that connecting Adhaar and PAN will violate their fundamental right to privacy.Critics claim that the Section 139AA of the Income Tax Act's connection of Adhaar with PAN is an attempt to curtail civil freedoms.

However, the centre firmly informed the Supreme Court that the Adhaar Card's biometric data was secure and had not come into the hands of unauthorised parties.

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