How to Link PAN to Aadhaar on the New Income Tax Portal

The Income Tax Department has made it clear that using a PAN Card that has not been linked with Aadhaar or if someone is using a duplicate PAN, then it could cost taxpayers Rs.10,000 per transaction. This penalty comes under Section 272B of the Income Tax Act and applies to anyone who continues to use an inactive PAN for any financial activity. A person cannot use an inoperative PAN for filing income tax returns, opening bank accounts, buying or selling property, or making investments. But the department will not impose a fine immediately as taxpayers will be given a fair chance to explain the issue. If the reason is considered to be genuine and not done on purpose, the authorities may not impose a fine.

The Central Board of Direct Taxes has declared 20% TCS on purchase of expensive items worth Rs.10 lakh if they do not show their PAN card. For example, if someone buys a luxury watch worth Rs.15 lakh without showing their PAN, then they would have to pay TCS of 20% on 15 lakh i.e. Rs.3 lakh. However, 1% TCS will be deducted by the seller if the buyer shows a PAN card. The deducted tax will be reported and can be verified on the buyer's Form 26AS. This amount can be used to claim a tax credit or refund when filing the income tax return.  

The rule was applicable from 22 April 2025 with the aim of enhancing transparency, monitoring high-value transactions, and tax evasion. The tax is levied on luxury watches, handbags, designer shoes, art pieces, yachts, helicopters, and horses for racing. To avoid paying higher tax, buyers are advised to provide their PAN card during the purchase of any expensive product.  

In a significant relief to a specific group of taxpayers, the Ministry of Finance has announced that individuals who were allotted a PAN based on the Enrolment ID of their Aadhaar application — submitted before 1 October 2024 — can now link their PAN and Aadhaar without paying the usual late fee of Rs. 1,000. However, the linkage must be completed by 31 December 2025. This clarification comes in the wake of a circular issued by the Central Board of Direct Taxes (CBDT) on 3 April 2025, which instructs that all such PAN holders must inform the Income Tax Department of their Aadhaar number by the year-end.  

The notification specifically applies to those who had applied for Aadhaar before 1 October 2024 and subsequently received a PAN using the Enrolment ID mentioned in the application. It is important to note that the waiver of the late fee applies only to those who fall within this specific category. For all other PAN holders who have not yet linked their PAN with Aadhaar, the Rs. 1,000 late fee remains applicable. Additionally, failure to complete the linking may render the PAN inoperative, which could impact tax refunds and interest payouts.