The Ministry of Finance, Department of Revenue, and Central Board of Direct Taxes have recently introduced the Income-tax (Fourth Amendment) Rules of 2023, which will come into effect from April 1st, 2023. This amendment, outlined in the G.S.R.227(E) notification dated March 28th, 2023, focuses on the procedure for making the permanent account number (PAN) inoperative and the implications for individuals who fail to comply with the new regulations.
Table of Contents
- Introduction
- Rule 114AAA – Making PAN Inoperative
- 2.1 Failure to Intimate Aadhaar Number
- 2.2 Intimation of Aadhaar Number After the Deadline
- 2.3 Consequences of Inoperative PAN
- Impact on Tax Refunds and Interest Payments
- Higher Tax Deduction and Collection Rates
- Formats and Standards for Verifying PAN Status
- Conclusion
- FAQs (Frequently Asked Questions)
1. Introduction
The Income-tax (Fourth Amendment) Rules of 2023, introduced by the Central Board of Direct Taxes, bring significant changes to the process of managing PAN and Aadhaar numbers for taxpayers. These amendments aim to enhance the effectiveness of tax administration and streamline the verification of individuals’ PAN status.
2. Rule 114AAA – Making PAN Inoperative
The key focus of the new amendment is the modification of Rule 114AAA in the Income-tax Rules, 1962. This rule specifies the procedure for making a PAN inoperative under certain circumstances.
2.1 Failure to Intimate Aadhaar Number
According to the revised rule, if a person who was allotted a PAN on or before July 1st, 2017, fails to intimate their Aadhaar number by March 31st, 2022, their PAN will become inoperative. It is crucial for individuals to ensure they have linked their PAN with their Aadhaar number within the specified timeframe.
2.2 Intimation of Aadhaar Number After the Deadline
In case the individual intimated their Aadhaar number after the deadline of March 31st, 2022, they can still reactivate their PAN. However, they must pay a fee per the guidelines provided in sub-rule (5A) of rule 114. Once the fee is paid, the PAN will become operative within thirty days from the date of the Aadhaar number intimation.
2.3 Consequences of Inoperative PAN
When an individual’s PAN becomes inoperative, certain consequences arise for the period between the specified date and when it becomes operative again:
(i) Refunds of any tax amount or part thereof, due under the provisions of the Income-tax Act, will not be processed. (ii) Interest on such refunds will not be payable for the period between the specified date and the date of reactivation. (iii) Higher tax deduction rates, in accordance with section 206AA, will be applicable for individuals subject to tax deduction under Chapter XVIIB. (iv) Higher tax collection rates, in accordance with section 206CC, will be applicable for individuals subject to tax collection at source under Chapter XVII-BB.
3. Impact on Tax Refunds and Interest Payments
During the period when the PAN is inoperative, individuals will not receive any tax refunds. It is essential to ensure timely intimation of the Aadhaar number to avoid any delays in refund processing. Furthermore, no interest will accrue on the refund amount for the duration of PAN inoperability.
4. Higher Tax Deduction and Collection Rates
In cases where a tax deduction is applicable under Chapter XVIIB and tax collection at source is required under Chapter XVII-BB, individuals with an inoperative PAN will face higher tax deductions and collection rates. These measures aim to encourage individuals to promptly update their PAN with their Aadhaar number and maintain compliance with income tax regulations.
5. Formats and Standards for Verifying PAN Status
The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) will prescribe the necessary formats, standards, and procedures for verifying the operational status of a PAN. These guidelines will facilitate the verification process and ensure accurate compliance with the new regulations.
6. Conclusion
The Income-tax (Fourth Amendment) Rules of 2023 introduced significant changes to the process of managing PAN and Aadhaar numbers. By making the PAN inoperative for individuals who fail to update their Aadhaar numbers within the specified timeframe, the authorities aim to improve tax administration and ensure compliance with tax regulations. It is crucial for individuals to understand these changes and take prompt action to update their PAN details to avoid any adverse consequences.
7. FAQs (Frequently Asked Questions)
Q1. Can I reactivate my PAN if it becomes inoperative? Yes, you can reactivate your PAN by intimating your Aadhaar number after the deadline of March 31st, 2022, and paying the specified fee. Your PAN will become operative within thirty days from the date of intimation.
Q2. What happens if I fail to update my PAN with my Aadhaar number? If you fail to update your PAN with your Aadhaar number by the specified deadline, your PAN will become inoperative. This can result in consequences such as the non-processing of tax refunds and the application of higher tax deductions and collection rates.
Q3. Is there a fee for updating my PAN with my Aadhaar number after the deadline? Yes, you will be required to pay a fee as per the guidelines provided in sub-rule (5A) of rule 114 to reactivate your PAN after the deadline.
Q4. Will interest be payable on tax refunds during the period of PAN inoperability? No, interest will not be payable on tax refunds for the period between the specified date and the date of reactivation when the PAN is inoperative.
Q5. Where can I find the formats and standards for verifying PAN status? The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) will specify the necessary formats, standards, and procedures for verifying the operational status of a PAN.