Beyond PAN Limitations: Do These Financial Tasks Without A Working PAN Card

If you have not linked your Permanent Aadhaar Number (PAN) to Aadhaar before June 30, your PAN is now considered inoperative. This may lead to some challenges in your financial activities and tax-related tasks. For instance, you won’t be able to invest in bank fixed deposits or mutual fund schemes, file income tax returns (ITR), or receive tax refunds.

However, even with an inoperative PAN, there are certain financial transactions that you can still carry out. It’s essential to be aware that these transactions may be subject to higher tax deductions at source (TDS) and tax collection at source (TCS).

Here are some examples of such transactions:

1. Higher TDS on Bank Fixed Deposits: If you earn more than Rs 40,000 from bank fixed deposits or recurring deposits (Rs 50,000 for senior citizens) in a fiscal year, you will incur higher TDS.
2. Higher TDS on Dividends: Receiving dividends from companies or mutual funds exceeding Rs 5,000 in a fiscal year will also result in higher TDS.
3. Higher TDS on Sale of Immovable Property: If you sell immovable property for more than Rs 50 lakh, you’ll attract higher TDS.
4. Higher TCS on Purchase of Cars: Buying a car worth more than Rs 10 lakh will involve higher TCS.
5. Higher TDS on EPF Withdrawals: Withdrawing more than Rs 50,000 from your EPF account when tax is due will lead to higher TDS.
6. Higher TDS on Rent Payments: Making rent payments to the landlord where the monthly rent exceeds Rs 50,000 will incur higher TDS.
7. Higher TDS on Sale of Goods and Services: Selling goods and services for an amount exceeding Rs 50 lakh will attract higher TDS.
8. Higher TDS on Contract Payments: If you hire someone for a contract job and pay them more than Rs 30,000 for a single contract or Rs 1 lakh in total, you’ll have to pay higher TDS.
9. Higher TDS on Commission or Brokerage Payments: Receiving commission or brokerage payments above Rs 15,000 will also result in higher TDS.

According to Suresh Surana, founder of RSM India, a business consulting firm, sections 206AA and 206CC of the Income Tax Act, 1961, have significant implications in such cases. If you don’t provide your PAN during transactions subject to TDS, the tax deductor becomes responsible for deducting 20% of the amount as tax. This rule also applies if your PAN is inoperative.

Furthermore, section 206CC states that if you don’t provide your PAN or if it’s inoperative, a higher TCS is applicable, which can be twice the specified rate or 5% (whichever is higher). However, the recent Budget 2023 has set a maximum TCS rate of 20% from July 1, 2023, even if you don’t provide PAN.

While having an inoperative PAN may restrict certain financial activities, it’s essential to be aware of the implications and take necessary actions to ensure smooth financial transactions and tax compliance.