In accordance with Section 139AA of the Income Tax Act, 1961, it was made mandatory to link the Aadhaar number with PAN by the deadline of June 30. As per the guidelines issued by the Central Board of Direct Taxes (CBDT), failure to comply with this requirement would result in the PAN becoming inoperative, effective from July 1, 2023.
Certain individuals are exempted from the PAN and Aadhaar linkage obligation, including residents of Assam, Jammu and Kashmir, Meghalaya, non-residents as defined by the Income Tax Act, and individuals who are not citizens of India.
Financial Transactions that Cannot be done with an Inoperative PAN
An inoperative PAN imposes limitations on specific financial transactions that individuals are unable to perform. These include:
Opening accounts with banking companies or cooperative banks.
Applying for the issuance of credit or debit cards.
Establishing demat accounts with depositories, participants, custodians of securities, or other entities registered with the Securities and Exchange Board of India (SEBI).
Making cash payments exceeding Rs 50,000 to hotels or restaurants at a single instance.
Making cash payments exceeding Rs 50,000 in relation to foreign travel or the purchase of foreign currency at a single instance.
Investing amounts exceeding Rs 50,000 in mutual funds for the acquisition of units.
Depositing cash exceeding Rs 50,000 in a single day with banking companies or cooperative banks.
Making cash payments exceeding Rs 50,000 in a single day for the acquisition of bank drafts, pay orders, or banker's cheques from banking companies or cooperative banks.
Placing time deposits exceeding Rs 50,000 during a financial year with banking companies or cooperative banks.
Making cash payments or payments through bank drafts, pay orders, or banker's cheques exceeding Rs 50,000 in a financial year for one or more prepaid payment instruments, as defined by the RBI's policy guidelines.
Paying life insurance premiums aggregating to more than Rs 50,000 in a financial year to insurance providers.
Entering into contracts for the sale or purchase of securities (excluding shares) exceeding Rs 1 lakh per transaction.
Selling or purchasing shares of unlisted companies for an amount exceeding Rs 1 lakh per transaction.
Making payments exceeding Rs 50,000 to companies or institutions for the acquisition of debentures or bonds issued by them.
Paying amounts exceeding Rs 50,000 to the Reserve Bank of India (RBI) for acquiring bonds issued by the RBI.
Financial Transaction that may attract higher Tax deduction
a. Sale or purchase of motor vehicles (excluding two-wheeled vehicles).
b. Sale or purchase of immovable properties valued at more than Rs 10 lakh or valued at an amount exceeding Rs 10 lakh as determined by the stamp valuation authority mentioned in Section 50C of the Income Tax Act.
c. Sale or purchase of goods or services (excluding those specified above) for an amount exceeding Rs 2 lakh per transaction.