The Central Board of Direct Taxes recently requested that all taxpayers link their permanent account number (PAN) with their Aadhaar by March 31, 2023. (CBDT). Starting on April 1, 2023, the PAN will become useless for any noncompliance.
According to SEBI, the capital markets regulator, investors must link their PAN with their Aadhaar by the end of this month in order to continue transacting in the stocks market.
The Income-tax Department announced the linking of PAN with Aadhaar in response to instances when several permanent account numbers (PANs) were allocated to one person or when one PAN was assigned to more than one person.
In order to have a dependable technique of de-duplicating the PAN database, Aadhaar quoting was made obligatory for taxpayers who are qualified to get them in the PAN and income return application forms.
Who requires linking their PAN with Aadhaar?
According to a CBDT circular issued in March 2022, every person who received a PAN as of July 1, 2017, is required by the Income-tax Act to provide the IRS with their Aadhaar number so that Aadhaar and PAN can be linked.
The PAN shall terminate on March31, 2023 in the event that this is not fulfilled.
Who is not required to have a PAN-Aadhaar link?
For a small subset of persons, this relationship is not essential.
someone who is at least 80 years old.
a non-resident under the Income Tax Act.
one who does not possess Indian citizenship.
If PAN and Aadhaar are not connected, what will happen?
A person’s PAN will stop functioning if they don’t link it to their Aadhaar, according to CBDT.
If the individual fails to submit, divulge, or quote their PAN in this circumstance, they will be subject to all penalties under the Income-tax Act.
Many negative outcomes of non-compliance exist, including:
The person is not allowed to submit a tax return with an invalid PAN.
There won’t be any processing of pending refunds.
Unused PANs are not eligible for outstanding refunds.
Current processes, such as those concerning defective returns, cannot be concluded after the PAN becomes inactive.
Tax will need to be withheld at a higher rate if PAN is no longer operational.
In addition to these negative consequences, the person can also have trouble carrying out other financial transactions, like those with banks, because PAN is a fundamental KYC criterion for those transactions.
For what reason did SEBI require investors to link their PAN and Aadhaar?
Because PAN is the crucial identification number and a component of the KYC criteria for all transactions in the securities market, all SEBI-registered companies and Market Infrastructure Institutions (MIIs) are required to ensure that all participants have proper KYC.
All current investors shall ensure that their PAN and Aadhaar are connected before to March31, 2023 in order to execute continuous and seamless securities market transactions and prevent the adverse impacts of non-compliance with KYC standards. Transactions involving securities and other items may be limited until the PAN and Aadhaar are linked.
SEBI and CBDT made a big move to promote transparency and accountability in the financial sector, which will help to stop tax evasion and money laundering.