F.No.370142/14/2022-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi,
*****

Circular No. 7 of 2022 | Dated 30th of March, 2022

Sub.: Clarification with respect to relaxation of provisions of rule 114AAA of Income-tax Rules, 1962 prescribing the manner of making Permanent Account Number (PAN) inoperative – reg.

Instances had come to the notice of the Income-tax Department that multiple permanent account numbers (PANs) have been allotted to one person or one PAN has been allotted to more than one person. In order to have a robust way of de-duplication of PAN data base, Finance Act, 2017 with effect from 1st April, 2017, inserted section 139AA in the Income-tax Act, 1961 (the Act) making it mandatory for a taxpayer who is eligible to obtain Aadhaar, to quote his Aadhaar in the application form for PAN and return of income.

2. Sub-section (2) of section 139AA of the Act makes it mandatory for every person who has been allotted a PAN as on 1st July, 2017 to intimate his Aadhaar Number so that the Aadhaar and PAN can be linked. This is required to be done on or before a notified date, failing which the PAN shall become inoperative.

Non linking of PAN with Aadhaar Rule 114AAA Inoperative PAN - Clarification

3. Accordingly, in case of failure to intimate the Aadhaar Number by the last extended notified date i.e. 31.03.2022, the PAN allotted to the person shall be made inoperative in accordance with the provisions of the Act. Further, the Finance Act, 2021 inserted a new section 234H in the Act to complete the process of PAN-Aadhaar linking for identifying bogus PANs. This section provides that where a person who is required to intimate his Aadhaar under subsection (2) of section 139AA fails to do so on or before a notified date, he shall be liable to pay a fee not exceeding a sum of one thousand rupees, as may be prescribed, at the time of making intimation under sub-section (2) of section 139AA after the said date.

4. Further, rule 114AAA of the Income-tax Rules provides that if PAN of a person has become inoperative, he will not be able to furnish, intimate or quote his PAN and shall be liable to all the consequences under the Act for such failure. This will have a number of implications such as:-

(i) The person shall not be able to file return using the inoperative PAN

(ii) Pending returns will not be processed

(iii) Pending refunds cannot be issued to inoperative PANs

(iv) Pending proceedings as in the case of defective returns cannot be completed once the PAN is inoperative

(v) Tax will be required to be deducted at a higher rate as PAN becomes inoperative

4.1 In addition to the above, the tax payer might face difficulty at various other fora like banks and other financial portals, as PAN is one of the important KYC criterion for all kinds of financial transactions.

5. Hence, in order to have smooth application of section 234H and existing rule 114AAA, it is clarified that the impact of sub-rule (2) of rule 114AAA i.e. where a person,whose permanent account number has become inoperative under sub-rule (1) is required to furnish, intimate or quote his permanent account number under the Act, it shall be deemed that he has not furnished, intimated or quoted the permanent account number, as the case may be, in accordance with the provisions of the Act, and he shall be liable for all the consequences under the Act for not furnishing, intimating or quoting the permanent account number, shall come into effect from 1st April, 2023 and the period beginning from 1st April, 2022 and ending with 31st March, 2023, shall be the period during which the said sub-rule shall not have its negative consequences of the nature referred to in the said sub-rule or specified in paras 4 and 4.1 above. However, the tax payer shall be liable to pay a fee in accordance with sub-rule (5A) of rule 114.

6. Hindi version to follow.

Shefali Singh

Under Secretary (TPL-IV), CBDT

Also Read

S. No.

Title

1. Consequences of Not-Linking PAN with Aadhaar applicable from 01.04.2023

CBDT Order No. F.No.370142/14/2022-lPL Dated: 30/03/2022

2. Rule 114AAA: PAN to become inoperative on failure to furnish Aadhaar

CBDT Notification No. 11/2020-Income Tax Dated: 13th February, 2020

3. CBDT prescribes fees for not linking PAN with Aadhaar

CBDT Press Release Dated: 30/03/2022

4. CBDT notifies Late fees for Delayed/Non linking of PAN with Aadhaar

Notification No. 17/2022-Income Tax, [G.S.R. 229(E).] Dated: 30/03/2022

5. Non linking of PAN with Aadhaar | Rule 114AAA | Inoperative PAN – Clarification

Circular No. 7 of 2022-Income Tax | Dated 30th of March, 2022

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5 Comments

  1. vswami says:

    In reference to the other 2 comments: Pointed attention may be drawn to the Proviso to Rule 114AAA(2) to provide that the board “shall notify the date from which such consequences shall apply to a person”.

    As such, while there is no clarity as of now, may have to wait for a notification in order to know how that is going to be of help in exceptional cases such as of a NRI !

  2. Vatsal says:

    What about Non Residents who haven’t applied for Aadhaar Number… What will happen to their PAN Numbers… ? Any clarification on the same ??

  3. vswami says:

    A RE-share of post elsewhere:
    A couple of viewpoints , personally believed to be with due merits, canvassed for but pending realisation and acceptance, are set out below:

    The mandatory requirement of ‘PAN’ under the IT Act (GSTN is the corresponding mandate under the GST Code) is intended for enabling the Revenue to, in its own interests, keep a track of commercial and other transactions having a taxation implication; so far so good!

    1. What is however not understood or prima facie considered unacceptable is that, even so, why the added obligation to comply with the newly introduced requirement of linking PAN with Aadhaar also should be imposed on the taxpayer?

    Of contextual relevance is the fact that Tax return filers are already obliged to fill in, without fail, the Aadhaar Number. As such, that should be more than adequate for enabling the Revenue to monitor and have the intended purpose served ; more so, in the cases of salaried and other law-abiding honest taxpayers.

    2. The attendant threat of cancellation of PAN and disabling non-compliers with other dire consequences does not, by any thinking, seem to make any sense, besides palpably betraying abject poverty of the COMMON SENSE, which a human being is normally taken to have been endowed with by the mother nature.
    Is it not a ‘terrorism’ , of the same objectionable kind as, – rather partaking the nature of , ‘tax- terrorism’ being complained of in recent times ?!

    3. More importantly, the regulatory authorities well in place- such as RBI, SEBI, etc. , have been sufficiently empowered and are expected to duly take care of strict compliance in such areas. Premised so, there is obviously no rhyme or reason or rationale in imposing the additional requirement on account holders- / taxpayers , as a community.

    For instance, banking institutions (including NBFCs) are under the effective control and constant supervision of the RBI. And, the so called ‘KYC’, -as the nomenclature itself bears out, – is a document compulsorily required to have on its record without fail. As such, it is for them to take al steps and ensure that is complete in all respects.

    This is an aspect which may be found to have been covered, even in earlier Posts, as regards the RBI’s mandate of ‘NOMINATION’ for opening /maintaining bank accounts.

    The very same position also holds good for Demat accounts, within the regulatory domain of SEBI.

    BaCk / OVER to the Experts at large, in practice or otherwise in the respective fields of activity !
    courtesy

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