Do PAN and Aadhaar still need to be linked? You may face Rs 6,000 penalty while filing ITR

Your PAN (Permanent Account Number) has probably been tagged inoperative if you haven’t linked it to your Aadhaar. The last date to do so was June 30. The major impact of a failure to link will be on income tax return (ITR) filing since only three weeks are left to do that. While you may not be able to file your ITR until your PAN-Aadhaar get linked, even if you start the linking process now, it may take a month to do so, and you will have to shell out a maximum of Rs 6,000 to file your ITR after July 31.

Amit Gupta, Managing Director at SAG Infotech, said, “If your PAN is marked ‘inoperative’, it has become inactive due to non-compliance with certain regulations. The PAN can be made operative again within 30 days from the date of intimation of the Aadhaar to the prescribed authority if the penalty amount is already paid.”

To reactivate PAN, you must follow the procedures prescribed by the income tax authority.

The time required to reactivate an inactive PAN may vary depending on the specific circumstances and the efficiency of the tax authorities. The reactivation procedure generally includes submitting the required documentation, such as a PAN reactivation application and any additional documents requested by the tax authority to prove that you are in tax compliance.

After submitting the required documents, it may take several weeks to months for the tax authorities to review and process your application. The exact schedule may vary depending on the IRS workload, additional reviews that may be required, and other factors specific to your case.

Sudhakar Sethuraman, Partner, Deloitte India, said, “Linking Aadhaar with PAN had been mandatory, and the deadline was June 30 2023. Failure to link would make the pan inoperative effective July 1 2023. With an inoperative PAN, the individual cannot file the tax return and cannot receive a tax refund. Nevertheless, an Aadhaar can still be linked with a PAN upon payment of a penalty of Rs 1,000. It could take upto 30 days for the PAN to become operative. There are chances for an individual to miss the deadline (July 31 2023) if the PAN is inoperative. In such a case, the individual would have to file a belated return with a penalty of Rs 5,000 (if the entire revenue surpasses Rs 5 lakh). If one has not done their homework, i.e., linking Aadhaar with PAN (despite being provided with several extensions by the government), they should be prepared for a dual penalty as stated above.”

Maneet Pal Singh, Partner, I.P. Pasricha & Co, also said, “There is a relief given to small taxpayers—if their total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1,000.”

Also read: Deadline for linking PAN and Aadhaar ends today. Find all the related details here

Consequences of filing ITR after deadline

Submitting ITR after the due date can bring numerous repercussions for taxpayers. Firstly, there might be economic implications in fines or interest charges. The Income Tax Department often imposes a late submission fee or penalty for submitting ITR after the deadline, which can differ based on the delay period and the taxpayer's income.

Additionally, if there is any tax liability, late submission can attract interest charges on the outstanding tax amount. Another outcome of filing a delayed ITR is the forfeiture of certain privileges and possibilities. “Late filers may not be able to carry forward specific losses, such as capital losses, business losses, or losses from house property, to subsequent years. This can result in missed opportunities for lessening future tax obligations. Moreover, submitting ITR after the due date can lead to increased scrutiny from the tax authorities. It may raise suspicions or trigger inquiries into the reasons for the postponed submission, potentially inviting additional scrutiny or audits. This can be a time-consuming and stressful process for taxpayers,” said Gupta.

Postponing ITR submission also implies delayed processing of tax refunds, if applicable. If you are eligible for a tax refund, submitting your ITR late can delay receiving your refund amount, as the processing time is dependent on the submission date.

Singh said, “Some of the deductions are also disallowed, including those under sections 10A, 10B, 80-IA, 80-IB, 80-IC, 80-ID, and 80-IE of the income tax act. Furthermore, the taxpayer can lose interest on the refund under section 244A, if eligible, if the delay happens due to the late filing of the taxpayer. One cannot choose a new tax regime when filing a late return. The tax regime cannot be changed in a belated return. If you have salary income and have already filed an ITR before July 31, AY, you can change the regime by filing a revised return.”

Lastly, submitting a delayed ITR can impact financial transactions and loan applications. Gupta said, “Many financial institutions require individuals to provide their ITR as proof of income for various purposes, such as loan applications, visa applications, or credit card approvals. A delayed or non-existent ITR can hinder such transactions and potentially impact your financial opportunities.”