August 23, 2023: The linkage of PAN (Permanent Account Number) with Aadhaar has become a crucial requirement for financial transactions in India. The recent introduction of the Post Office Savings Account (Amendment) Scheme, 2023, has further emphasized the significance of this linkage. If an individual’s PAN is not linked with Aadhaar by the stipulated deadline, their PAN will be classified as ‘inoperative.’ This label carries various implications, particularly for banking transactions. Let’s explore the effects of an inoperative PAN on banking transactions and understand how it might impact individuals.
1. Salary Crediting and Banking Transactions
Contrary to concerns, an inoperative PAN does not hinder the credit of salary to an individual’s bank account. An individual’s employer will continue to credit their salary into the bank account even if the PAN is marked as inoperative. This is reassuring news for employees who may have been worried about the direct impact on their earnings and monthly financial transactions.
2. Impact on Debit and Credit Cards
However, the story changes when it comes to debit and credit card usage. If an individual’s PAN becomes inoperative, certain foreign currency transactions such as ATM withdrawals and point of sale (POS) transactions might be restricted by banks. Additionally, foreign currency outward remittances, which involve sending money abroad, could also be limited due to the inoperative PAN. This limitation is particularly relevant for those who engage in overseas transactions, and it’s important to be aware of these potential restrictions.
3. KYC Compliance and Alternate Documents
Inoperative PAN could impact an individual’s existing KYC (Know Your Customer) compliance for their bank account. Banks typically require a valid and active PAN for KYC purposes. If an individual’s PAN is inoperative, they may be asked to update their PAN information or provide an alternative officially valid document to maintain KYC compliance. Acceptable alternate documents include Aadhaar, Voter’s Identity Card, passport, driving license, job card issued by NREGA (National Rural Employment Guarantee Act), and National Population Register containing name and address details.
4. Form 60 and Form 15G/H Submission
For those with an inoperative PAN, certain transactions may require additional documentation. Cash deposits exceeding Rs 50,000 per day could be restricted, and banks might ask for Form 60 for cash transactions above this threshold. Form 60 is required for transactions where PAN is mandatory but not available.
Regarding Form 15G/H, which is typically submitted to prevent tax deduction at source (TDS) on interest income, the impact of an inoperative PAN is noteworthy. Banks might not accept Form 15G/H for deposits in cases where the PAN is inoperative. Additionally, if an individual has not provided a PAN or if the PAN has become inoperative, higher TDS rates may be applied.
While an inoperative PAN does not directly impact salary crediting, it can have repercussions for certain banking transactions, credit card usage, and KYC compliance. Staying informed about these effects is essential for individuals to navigate their financial affairs smoothly. If faced with an inoperative PAN, individuals are encouraged to work with their banks to update their PAN information or provide the necessary alternative documents to ensure seamless banking experiences.
