Rule 114AAA of the Income Tax Rules, 1962, deals with the consequences of a Permanent Account Number (PAN) becoming inoperative due to failure to link it with Aadhaar, as mandated by the Income-tax Act.
Key Aspects of Rule 114AAA:
- PAN Inoperative Status: Failure to provide the Aadhaar number as required by the Income-tax Act will result in the PAN becoming inoperative.
- Consequences of Inoperative PAN:
- Higher tax deduction at source (TDS).
- Higher tax collection at source (TCS) rates. These higher rates apply until the PAN becomes operative again.
In simpler terms, if you don't link your PAN with your Aadhaar by the due date, your PAN will become inactive. While inactive, any financial transactions where PAN is required will be subject to higher tax deductions and collections. Once you link your PAN and Aadhaar, it becomes active again, and normal tax rates apply.
