Income Tax Alert: Linking of PAN and Aadhaar

As you are aware that the Government of India is requesting taxpayers for linking of PAN and Aadhaar from past year. However, due to the ongoing pandemic, the Government had been extending the deadline further and further for linking of PAN and Aadhaar. Recently, the Government yet again extended the deadline but this time its ending on 30.06.2021.

Post the deadline, failure to link PAN with Aadhaar shall attract a fees not exceeding ₹ 1,000 u/s 234H on individual and shall be payable at the time of linking of the PAN. Further, where till the time such PAN is not linked, it will be treated as inoperative PAN, thus attracting such consequences as are applicable for non-availability of PAN.

An individual having inoperative PAN will not be able to conduct financial transactions wherever quoting of PAN is mandatory. For example; An individual may not be able to open a bank account, sell or buy investments or properties, or he may face higher rate of TDS as per the provisions of section 206AA.

Accordingly, companies making payment to vendors who are individuals or to employees will be required to check the validity of their PAN vis the Aadhaar linking and where such linking has not been done, the rate applicable for withholding tax should be accordingly adjusted.