PAN-Aadhaar Linkage: A Relief for Individuals

Deadline Extension for Penalty Relief

The Income Tax Department has extended a helping hand to taxpayers who missed the June 30, 2023 deadline for linking their PAN and Aadhaar. The department has granted a reprieve from penalties for those who failed to comply by the original date.

Consequences of PAN Inactivation

Prior to the deadline extension, individuals with inactive PANs faced higher tax deductions at source (TDS) and tax collection at source (TCS) rates. For instance, the TDS on house rent allowance (HRA) for those with inactive PANs rose to a steep 20%.

Relief for Deductors and Collectors

Many deductors and collectors were caught unaware of the inoperative status of PANs, leading to incorrect tax deductions or collections. This resulted in penalties imposed by the income tax department. The government has now intervened, exempting deductors or collectors from liability for transactions that occurred up to March 31, 2023, provided the PAN became inoperative before the end of May.

Importance of PAN-Aadhaar Linkage

Experts emphasize the significance of timely PAN-Aadhaar linkage. Failure to do so can deprive taxpayers of refunds and interest earned on their refunds. They urge individuals to promptly link their PAN and Aadhaar to avoid such drawbacks.

The Voice of Tax Experts

"This is a significant relief for those who were obligated to withhold or collect tax at higher rates," said Kuldip Kumar, partner at Mainstay Tax Advisors. "It's imperative for taxpayers to link their PAN with Aadhaar as soon as possible, as they face the risk of delayed refunds and lost interest otherwise."

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