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Section 234H: Late fees for failure to link PAN with AADHAAR

section-234h-late-fees-for-failure-to-link-pan-with-aadhaar

The Finance Bill, 2021 as passed by the Lok Sabha has inserted a new Section 234H to levy a fee for default relating to the intimation of the Aadhaar Number. Accordingly, if a person is required to intimate his Aadhaar Number under Section 139AA(2) and such person fails to do so within the notified date, he shall be liable to pay a fee, as may be prescribed, not exceeding Rs. 1,000 at the time of making such intimation after the notified date.

Finance Act, 2017 introduced section 139AA in the Income Tax Act, 1961 (“Act”) which requires compulsory linking of Aadhaar with PAN within the notified date for this purpose. In the case of failure to link the PAN with Aadhaar within the notified date, the PAN will become inoperative. The last notified date to link the PAN and Aadhaar is extended several times since September 2019 when it was first notified. At present, the last date to link the PAN and Aadhaar is notified as 31st March 2021.



The intention of introducing the PAN-Aadhaar link was due to the fact that many instances have come to notice where multiple PANs have been allotted to one person or one PAN has been allotted to multiple persons. In order to have a robust way of de-duplication of the PAN database, section 139AA is inserted into the Income-tax Act.



Finance (No. 2) Act, 2019 has amended the provisions of section 139AA(2) which provides the consequences for failure to link the PAN with his/her Aadhaar.


Read the detailed saga of PAN-Aadhaar linking in this article. 


Prior to the amended provisions, proviso to section 139AA(2) provided that the PAN allotted to a person shall be deemed to be invalid, in case the person fails to intimate the Aadhaar number, on or before the notified date. 


In order to protect the validity of transactions previously carried out through such PAN, Finance (No. 2) Act, 2019 amended 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 this context, CBDT issued a Notification No. 11/2020 dated 13.02.2020 whereby CBDT has prescribed Rule 114AAA in the Income Tax Rules, 1962 to prescribe the manner of making permanent account number (PAN) inoperative.


One should note that though the date of linking the PAN and Aadhaar is extended to 31.03.2021, there is no consequential amendment made in Rule 114AAA which specifies the procedure of making a PAN inoperative if the PAN is not linked to Aadhaar by 31st March 2020. The date mentioned in Rule 114AAA is not extended. However, since Rule 114AAA is subordinate to the main provision of section 139AA(2) which requires linking of PAN with Aadhaar within the notified date i.e. 31-03-2021, thus Rule 114AAA will operate once the date notified in the main provision expires.


Government has on many occasions extended the last date for linking PAN with Aadhaar as per the provisions of section 139AA. The last date in this regard is extended to 31.03.2021 as per Notification No. 35/2020. This is further legislated vide The Taxation Amendment Act, 2020.


However, this time it seems the government is in no mood to further extend the last notified date of linking PAN and Aadhaar from 31.03.2021. This is because of the fact that the government has now introduced late fees for failure to link the PAN with Aadhaar within the notified date.


For this purpose, Finance Bill, 2021, as passed by the LokSabha on 23.03.2021, proposed to insert section 234H in the Act to provide for fees of Rs. 1,000 to link PAN with Aadhaar after the last notified date.


Text of proposed section 234H is reproduced below-


Fee for default relating to intimation of Aadhaar Number.


“234H. Without prejudice to the provisions of this Act, where a person is required to intimate his Aadhaar number under sub-section (2) of section 139AA and such person fails to do so on or before such date, as may be prescribed, he shall be liable to pay such fee, as may be prescribed, not exceeding one thousand rupees, at the time of making intimation under sub-section (2) of section 139AA after the said date.”.’.


It should be noted that section 234H was not proposed in the Finance Bill, 2021 when the same was introduced on 1-2-2021. It is introduced as a government amendment in the Finance Bill, 2021.


Therefore, as per the prevailing provisions, if a person fails to link his PAN with Aadhaar by 31.03.2021, he shall be liable to a late fee of Rs. 1,000 for linking the same from 1-4-2021.


Till the date he/she links his PAN-Aadhaar, his/her PAN shall become inoperative under Rule 114AAA. Once a PAN becomes inoperative, he shall be liable for all the consequences for not possessing a valid PAN.


Some of the consequences are once a PAN becomes inoperative are-


1. TDS/TCS will be at a higher rate u/s 206AA/206CC

2. Will not be able to file a return of income

3. Will be subject to penalty under section 272B for failure to comply with the provisions of Section 139A which requires quoting of PAN in certain financial transactions.


The PAN shall become operative once the same is linked with Aadhaar after payment of late fees of Rs. 1,000 as per section 234H. However, there is no late fee if PAN is linked with Aadhaar within 31.03.2021.


Update:

Last Date to link PAN-Aadhaar is extended to 30.06.2021


Read more Articles on Finance Bill, 2021

Download Finance Bill, 2021 as Passed by Lok Sabha

Record of Parliament Proceedings-Passing of Finance Bill, 2021 at Lok Sabha on 23rd March 2021

Lok Sabha Passes Finance Bill, 2021 with 109 Proposed Amendments

Finance Minister Presents Finance Bill 2021 after Union Budget 2021 in Loksabha

Download Finance Bill, 2021 as introduced in Loksabha

Download Memorandum Explaining the Provisions in the Financial Bill 2021

Income Tax announcements in Budget Speech:Union Budget 2021

New Income Tax Slab Rates after Union Budget 2021

Summary of Amendments and Changes in the Direct Tax Provisions as per Finance Bill, 2021

Changes in TDS and TCS Provisions by Finance Bill, 2021



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