PAN-Aadhaar Link: In a significant move towards ensuring a smoother financial landscape, the government of India has taken steps to address concerns regarding the linking of Permanent Account Number (PAN) with Aadhaar.
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As part of the ongoing efforts to streamline financial transactions and enhance transparency, the question on everyone’s mind is: “Will your salary be deposited into your bank account if your PAN is ‘inoperative’?”
Amidst the evolving financial regulations, the PAN-Aadhaar link has emerged as a crucial requirement for financial transactions. The linkage aims to curb tax evasion, promote accountability, and create a centralized database for monitoring financial activities. However, recent debates have surfaced regarding the implications of an ‘inoperative’ PAN on salary deposits.
The deadline to link PAN with Aadhaar was June 30, 2023. It was extended from the previous deadline of March 31, 2023 by the Central Board of Direct Taxes (CBDT) via a press release dated March 28, 2023. The income tax department has not issued any press release or circular to confirm if this deadline has been further extended from June 30, 2023.
Amit Gupta, MD, Sag Infotech said that if an individual’s PAN (Permanent Account Number) is not linked with Aadhaar by June 30, 2023, their PAN will be designated as ‘inoperative’.
What is an inoperative PAN?
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Inoperative PAN essentially equates to not having a PAN at all according to income tax regulations said Gupta while adding that the individual will be unable to utilize their PAN for mandatory purposes such as opening bank accounts or investing in bank Fixed Deposits (FDs).
Salary Credit in case of inoperative PAN
This inoperative PAN status raises queries about its potential impact on various banking transactions. For instance, questions arise regarding the crediting of salaries to bank accounts and the use of debit or credit cards.
Even with an inoperative PAN, an individual’s salary would continue to be credited to their bank account. Banks do not impose restrictions on crediting salaries despite an inoperative PAN. Although salaries may still be credited, delays could occur due to complications arising from an inactive PAN. Individuals need to inform their employers of the situation and collaborate to find suitable solutions, such as temporary alternative identification documents, noted Gupta.
Impact of an inoperative PAN on debit, credit cards
Amit Gupta added that Banks would restrict foreign currency ATM withdrawals, point of sale (POS) transactions, and outward foreign currency remittances for individuals with inoperative PANs.
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The status of an individual’s PAN could affect the functionality of linked credit and debit cards. Banks often employ PAN for Know Your Customer (KYC) processes when issuing cards. If the PAN is marked as ‘in-operative,’ card usage might be temporarily limited until the PAN is reactivated or linked with Aadhaar.
Impact of an inoperative PAN on Bank Accounts
An inoperative PAN could impact an individual’s existing KYC compliance for their bank account. Banks typically require an active PAN for KYC purposes. In such cases, individuals might need to update their PAN information or provide alternative officially valid documents to maintain compliance.
In the absence of a functional PAN, individuals are advised to submit Form 60, as confirmed by banking authorities. This form is necessary in instances where PAN is mandatory but unavailable. Furthermore, the implications of an inoperative PAN extend to the submission of Form 15G/H, which prevents Tax Deduction at Source (TDS) on interest income. Without a valid PAN, banks may not accept these forms for deposits, and higher TDS rates could be applied.
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In conclusion, an inoperative PAN status can have far-reaching consequences on an individual’s financial activities, from salary crediting to card usage and compliance with banking regulations. Prompt action, communication with employers, and collaboration with banks become crucial to navigate the challenges posed by an inoperative PAN.
