Why do PAN - Aadhar Card Linking mandatory this time by 31st March 2023 ?

As per a circular issued by CBDT in March 2022, the Income-tax Act makes it mandatory for every person who has been allotted a PAN as on July 1, 2017, to intimate his/her Aadhaar number so that Aadhaar and PAN can be linked. This is required to be done on or before March 31, 2023, failing which the PAN shall become inoperative.

CBDT has said that in case a person fails to link his or her PAN with Aadhaar, the PAN will become inoperative. In such a case, the person will not be able to furnish, intimate, or quote his/ her PAN, and shall be liable to all the consequences under the Income-tax Act for such failure. Some of the major implications of non-compliance are:

1. The person shall not be able to file the income tax return using the inoperative PAN.
2. Pending returns will not be processed.
3. Pending refunds cannot be issued to inoperative PANs.
4. Pending proceedings as in the case of defective returns cannot be completed once the PAN is inoperative.
5. Tax will be required to be deducted at a higher rate if PAN becomes inoperative.
6. Besides these consequences, the person may find difficulties in doing other financial transactions such as with banks, as PAN is an important KYC criterion for these transactions.

Since PAN is the key identification number and part of KYC requirements for all transactions in the securities market, all SEBI-registered entities and Market Infrastructure Institutions (MIIs) are required to ensure valid KYC for all participants.

All existing investors are required to ensure the linking of their PAN with their Aadhaar before March 31, 2023, for continual and smooth transactions in the securities market and to avoid consequences of non-compliance with the March 30, 2022, CBDT circular, as such accounts would be considered non-KYC compliant, and there could be restrictions on securities and other transactions until the PAN and Aadhaar are linked.