PAN-Inoperative Issues & Solutions: A Comprehensive Q&A Guide

1. Why has the PAN become inoperative?

Answer: The PAN has become inoperative due to the non-linkage of Aadhaar with PAN. It was mandatory for individuals with an Aadhaar card to link it with their PAN on or before June 30, 2023.?

According to Section 139AA(2) read with Rule 114AAA, failure to link Aadhaar with PAN results in the PAN becoming inoperative.

2. NRI's and OCI's are not eligible to obtain an Aadhaar, so how can it be made mandatory to link Aadhaar with PAN?

Answer: NRI's and OCI's are not eligible to obtain an Aadhaar unless they reside in India for a minimum of 182 days out of the 12-month period before the date of application. However, as per the gazette notification under the Aadhaar Act dated September 20, 2019, non-resident Indian citizens are entitled to obtain an Aadhaar after their arrival in India, without waiting to become a resident.

https://uidai.gov.in/images/Notification_regarding_NRI_Enrolment_16102019.pdf?

Therefore, NRI's and OCI's who do not have an Aadhaar are exempted from the linking process, as per notification no. 37 of 2017 dated May 11, 2017.

https://incometaxindia.gov.in/communications/notification/notification37_2017.pdf?

However, if NRI's or OCI's possess an Aadhaar card, it is mandatory to link it with PAN. as per the notification.

3.How can one verify if their PAN is operative or inoperative due to non-linking?

Answer: To verify the status of PAN, individuals can log in to their Income Tax portal. The portal will prompt whether the PAN has become inoperative. Alternatively, individuals can visit incometax.gov.in and use the "Verify Your PAN" quick link on the homepage to check if their PAN is inoperative.

Website Link:?

https://eportal.incometax.gov.in/iec/foservices/#/pre-login/verifyYourPAN

4. What are the consequences of a PAN becoming inoperative?

Answer: If a PAN becomes inoperative, the following consequences arise:

(i) refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made;?

(ii) interest shall not be payable on such refund for the period, beginning with the date specified under sub-rule (4) and ending with the date on which it becomes operative;?

(iii) For persons from whom tax is deductible under Chapter XVIIB, such tax shall be deducted at higher rate, in accordance with provisions of section 206AA; (minimum 20%)

(iv) For persons from whom tax is collectible at source under Chapter XVII-BB, such tax shall be collected at a higher rate, in accordance with provisions of section 206CC. (minimum 5%)

Rule 114AAA:

https://incometaxindia.gov.in/pages/rules/income-tax-rules-1962.aspx?

5. Can a person whose PAN has become inoperative file their income tax return?

Answer: Yes, a person whose PAN has become inoperative can file their income tax return and e-verify it. The return will be processed by the CPC, but the refund will not be issued until the PAN becomes operative.

6. If it is found during the processing of a return of income that the person is a non-resident, will a refund be issued as it is not mandatory for NRIs to obtain Aadhaar unless they arrive in India?

Answer: While it is expected that if the assesses has filed the return of income declaring non-resident status, the refund should be issued, there is no official clarification available in this regard.

7.? If TDS is deducted as per Section 206AA or 206CC due to the PAN being inoperative, can the assessee claim the higher TDS deducted while filing the return of income?

Answer: Yes, the assessee can claim the higher TDS credited if they have a PAN. Section 206AA and 206CC apply only when a person does not have a PAN. As the PAN has become inoperative and not canceled, the higher TDS can be credited to the PAN.

8. Will there be any consequences regarding investments in shares, mutual funds, bonds, or ongoing SIPs due to the PAN becoming inoperative?

Answer: NO,, apart from the four consequences mentioned earlier, investments in shares, mutual funds, bonds, and ongoing SIPs will not be affected. The amendment to Rule 114AAA, effective from April 1, 2023, introduced the four consequences.?

https://incometaxindia.gov.in/communications/notification/notification-15-2023.pdf

Prior to this amendment, the ramifications of PAN becoming inoperative were significant and could have affected login and operations on the Income Tax portal, filing returns of income, compliance, and investments in mutual funds, shares, bonds, and TDS deductions.

9. Will updating citizenship and residential status details in the IT portal make the PAN operative?

Answer: Technically NO, updating citizenship and residential status details in the IT portal will not make the PAN operative. The self-updating of the profile is not verified by the appropriate authority or officer with documentary evidence, and therefore, it will not update the details in the PAN database to make the PAN operative.

10. How can the PAN be made operative?

Answer:?

1. If an individual has an Aadhaar, they can pay a late fee of ?1,000 and link it to PAN. Within a maximum of 30 days, the PAN will become operative.
2. ?If you do not have an Aadhar and if you are not a citizen of India, they can file a manual application or an online grievance to the assessing officer (AO) along with a copy of their passport and, if available, a copy of the OCI card as evidence of being a citizen of a country outside India. By requesting the AO to update the citizenship status in the PAN database to "Not an Indian Citizen," the PAN should become operative. However, this cannot be guaranteed, although in our experience, when the citizenship status was updated in the PAN, it did not become inoperative.
3. ?If you do not have an Aadhar and if you are an Indian citizen but non-resident & have never come to India, then it was the understanding that if the PAN is in international taxation jurisdiction, then as per database, residential status is NRI. However, ITBA (Income Tax Business Application) which is used in jurisdictional offices had been updated recently and the assessing officer has been given the power to modify the residential status also after submission of supporting evidence which will aid determination of residential status and also substantiating the AO that one is a NRI. Meanwhile, it is also advisable that whenever such non-resident Indian citizens come to India,they can approach the nearest Aadhaar Seva Kendra and obtain an Aadhaar. They can then link it with PAN.

Please note that obtaining an Aadhaar card requires physical presence at an Aadhaar Seva Kendra and cannot be done online

1. If an individual does not have an Aadhaar and is an Indian citizen and resident in India, they should obtain an Aadhaar and link it with PAN.

Services offered by NRI Money Clinic

• Life & Critical Illness Insurance.
• Child education?
• Emergency Funds
• Retirement Plan
• Health Insurance?
• Wealth Building?
• Tax planning ( investments to minimize tax impact)
• Dollar investment ( Only for NRIs in?Middle East and Africa )
• Mutual Funds ( NRIs other than in US & Canada)?
• PMS ( Portfolio Management Service)
• Fractional Real Estate
• Cash flow planning (Pension, Guaranteed Return plan , Fractional real estate)
• Tax filing and chartered accountant services. (Outsourced services)
• Wills and inheritance planning.?(Outsourced services)
• Property record legal verification (Outsourced service)
• Real Estate in Dubai (Outsourced service)
• Real Estate in Mumbai and Goa (Outsourced service)

In case you are interested in using our services then you can send a message on WhatsApp to any of the below numbers

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