You can file ITR even if PAN and Aadhaar are not linked or PAN is inoperative

Filing ITR allowed despite inoperative PANThe Income Tax Department has now clarified that taxpayers are still allowed to file their Income Tax Return (ITR) even if their PAN has turned inoperative due to non-linking of Aadhaar. This comes as a relief for those who missed the deadline to link their Aadhaar and PAN cards but still wish to meet their filing obligation on time. However, while filing is permissible, taxpayers should understand that an inoperative PAN can lead to additional tax and compliance issues.

Consequences of having a defective PANEven though return filing is allowed, an inactive PAN may lead to severe hindrances in financial dealings. Banks and financial institutions may deny transactions of high value, opening a new account, or changing KYC details in case your PAN is in an inactive state. TDS and TCS on various transactions will also be withheld at 20 percent, enhancing the tax liability. Refund processing may be stalled until the time your PAN is made active.

Objective of mandatory PAN-Aadhaar linkingThe government also made Aadhaar linking with PAN compulsory to avoid tax evasion, eliminate duplicate PAN cards, and promote the transparency of financial transactions. The previous deadline for Aadhaar-Account Number/PAN linking was set, and defaulters are now charged, along with the non-functionality status of their PAN. The status impacts the use of PAN in various key activities such as investments, bank transactions, and income tax returns.

Steps to renew your PANTaxpayers with defunct PAN are still able to activate it by linking their Aadhaar on the income tax portal upon payment of the stipulated penalty. It is a straightforward process that can be done online by accessing the e-filing portal, making payment, and requesting linking. After payment and linking of Aadhaar, the PAN is made functional again through the procedure in around 30 days, reinstating its use for all financial and tax transactions.