The Income Tax Department has increased the strictness regarding Permanent Account Number (PAN) and Aadhaar linking. Those whose PAN is not yet linked to Aadhaar and are using it in financial transactions can now face strict action under Section 272B of the Income Tax Act. Under this section, a fine of up to ₹ 10,000 can be imposed on each such transaction.

No PAN-Aadhaar linking? Separate penalty on every transaction

The department says that if a person uses an inoperative PAN — especially in high value transactions — then he can be fined separately in each case. This includes transactions like opening or operating a bank account, investing in shares or mutual funds, buying property, applying for a loan and filing income tax returns.

How does a PAN become inoperative?

If you have not linked your PAN to Aadhaar, it is declared inoperative. Such PANs have now become invalid for most tax and financial purposes. In such a situation, if a person carries out financial activities with this inactive PAN, it will be considered a violation of the law.

Expert opinion: Carelessness and fraud – keeping an eye on both

According to tax advisor Vivek Jalan, Partner, Tax Connect Advisory Services LLP,

“A person may have two PANs due to some genuine reasons. For example, if there is a change in the name or other information, the person applies for a new PAN instead of getting the existing PAN corrected. Even after marriage, some women get a new PAN made, whereas only a change in the name would have been sufficient.”

Also read: PAN 2.0: Upgraded PAN with QR code to work like ‘business Aadhaar’ | What it means for users

But he also warned that some people deliberately get fake PANs made in someone else’s name on the basis of forged documents and even set up companies through it. In such cases, the Income Tax Department is now taking a completely strict stand.

“Now if an inoperative PAN is used by a person in financial transactions, he can be fined ₹ 10,000 per transaction under section 272B. But this penalty will be applicable only when the person is given a chance to clarify his position. If the mistake is genuine and unintentional, then there will be no penalty.”

Vivek Jalan suggested that if someone has two PANs, then the additional PAN should be surrendered online immediately. For this, ‘Changes or Correction in existing PAN data / Reprint of PAN card’ form has to be filled.

Monitoring with technology: No mistake now

Now the Income Tax Department is resorting to technology. With the help of Artificial Intelligence (AI) and data analytics, the misuse of PAN is being identified. The department claims that—

High-value transactions done through inactive PAN

Wrong or fake refund claims

Income tax returns filed with inactive PAN

— all these activities are being monitored. An official said,

“The AI-based system is now automatically flagging such cases and blocking the relevant transactions. We are now actively taking action.”

Warning for PAN holders

If you have not linked your PAN with Aadhaar yet, do so as soon as possible. Failure to do so may result in:

PAN being suspended

Bank or demat accounts being frozen

Tax refund claims being rejected

Income tax returns not being filed

This action is part of the government’s broader plan to strengthen identity verification and eliminate tax evasion.

In this age of digital surveillance and real-time monitoring, there is no room for error.

So if you are still using an inoperative PAN, be cautious — every transaction could cost you dearly.

Mr. Vivek Jalan – Partner Tax Connect Advisory Services LLP:

Due to certain genuine reasons a person may be having two PANs. For eg. Where Changes/Corrections in PAN are required and a taxpayer applies for new PAN instead of applying for correction in the same PAN; New PAN taken after marriage Instead of getting the last name changed; etc.

Also read: Big money rule changes from April 1: Tax relief, UPI deactivation, PAN-Aadhaar impact and more

However, there have been cases where people take out fake documents including a PAN in someone else’s name and even set up companies, etc. Hence the income tax department has initiated a crackdown on the use of inoperative Permanent Account Number (PAN), including levying penalties u/s 272B of Income Tax Act of up to Rs 10,000 for per financial transactions using such PAN.

However, the penalty will be crystallized only after providing a chance to the taxpayer to explain the reason behind that act. If the reason is genuine and the error was made by mistake, then he will not be charged with any penalty.

Hence if a taxpayer has two PANs, then one should apply for the surrender of additional PAN online by filling and submitting the ‘Changes or Correction in existing PAN data/ Reprint of PAN card’.