As per current income tax laws, PAN would become invalid if not linked with Aadhaar by September 30, 2019. However, Budget 2019 has proposed that instead of making PAN ‘invalid’ as per Section 139AA of the Income Tax Act, it would become ‘inoperative’.
Shalini Jain, Tax Partner, EY India says, “Earlier, failure to link PAN with AADHAAR on or before 30 September 2019 would have made the PAN invalid as if the PAN was never applied by the taxpayer. However, the change proposed in the budget would make PAN inoperative in a manner to be prescribed. The amendment is proposed to protect the past transactions. This may mean that there ‘may’ be a possibility to re-activate the PAN once it is linked with AADHAAR. However, one may have to wait for the clarification thereon.”
The budget document says, “In order to protect validity of transactions previously carried out through such PAN, it is proposed to amend the said proviso so as to provide that if a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner.”
In Budget 2017, it was announced that PAN must be mandatorily linked with Aadhaar or else, it will become invalid. The Central Board of Direct Taxes (CBDT) in its notification dated March 31, 2019 notified the date i.e. 30 September, 2019 by which PAN must be linked with Aadhaar.
In addition to this, individuals are mandatorily required to link PAN with Aadhaar while filing ITR.
This amendment replacing the word ‘invalid’ with ‘inoperative’ will come into effect from September 1, 2019.
Budget 2019 has also proposed the inter-changeability of PAN and Aadhaar for ensuring ease of compliance. This means that every person entering into a transaction where it is mandatory to furnish or quote his/her PAN as per the law but have not been allotted a PAN but possess the Aadhaar number can quote the Aadhaar instead of PAN.