Higher tax deductions at source levied on your banking services, debit, and credit card payments, online payments through mobile banking and UPI, and your interest, dividends, and other income, and you will have to discontinue your statutory deposits or De-mat accounts if you fail to link your Permanent Account Number (PAN) with your Aadhaar.
Recent amendments to the Income Tax Rules have made it mandatory to link Aadhaar with PAN on or before June 30, 2021. If the PAN is not associated with Aadhaar, the PAN will be considered invalid as per Rule 114AAA(3), 1962 (Laws) of the Income Tax Laws from 1 July 2021.
Under Section 206AA (6) of the Income Tax Act, 1961 (Act), the deductible PAN is invalid and the deductible holder has not paid his PAN deduction and the provisions are subject to Section 206AA (1) (consequently withholding at a higher rate).
Therefore, by Rule 114 AAA (3) of the Rules for Inactivation / Invalidation of PAN, as it is not related to Aadhaar, TDS under Section 206AA of the Act will be deduced at a higher rate of 20 percent. However, the higher TDS rate is 20 percent, however, only those who are currently subject to TDS can get a discount on fixed deposit interest, dividends, etc.
Where TDS does not apply there will be no impact. Benefits from mutual fund (MF) schemes, such as banks, post offices, companies with interest and dividend income, and asset management companies (AMC) to ensure that you do not apply high TDS on your income after the completion of the linking, as the tax deduction is the responsibility of the payer.
Therefore, you must act within the time limit, because once the higher tax is deducted, the payer will not process or implement any refunds/adjustments at a later date in such cases, and you will have to claim a reduced additional tax refund. Time to file your income tax return (ITR).
PAN, Aadhaar linking will help you to:
• To keep your PAN functional.
• Smooth operation of banking transactions.
• To enjoy uninterrupted services on your credit card.
• Avoid charging high TDS on interest earned (if applicable).
• Avoid high TDS (20% discount) on declared dividends.
• Avoid disabling/inactivating your trading and De-mat account.
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