Beware: Using Unlinked PANs Can Now Cost You ₹10,000 Per Transaction

The Income Tax Department is getting much stricter about linking your Permanent Account Number (PAN) with Aadhaar. If your PAN isn't linked and you use it in financial dealings, you could face severe penalties. Under Section 272B of the Income Tax Act, a fine of up to ₹10,000 can be imposed for each such transaction. 

What Makes Your PAN 'Inoperative'? 

Simply put, if you haven't linked your PAN to your Aadhaar, your PAN is declared 'inoperative'. This means it's no longer valid for most tax and financial activities. If you carry out any financial activities using such an inactive PAN, it's considered a violation of the law. 

Penalties for Using an Inoperative PAN 

The department has clarified that using an inoperative PAN, especially for high-value transactions, can lead to separate fines for each instance. This applies to a wide range of common financial activities, including: 

• Opening or operating a bank account 

• Investing in shares or mutual funds 

• Buying property 

• Applying for a loan 

• Filing income tax returns 

So, every time you use that unlinked PAN in these scenarios, you could be fined ₹10,000. 

Why Income Tax Department is Taking Such Strict Action? 

In some cases, there can be genuine reasons to have two PANs, such as applying for a new one due to a name change instead of correcting the existing one. However, the Income Tax Department is focusing on cases of deliberate misuse. This involves instances where fake PANs are created using false documents to commit fraud or set up illicit companies. 

The Income Tax department can impose a penalty of upto ₹10,000 on such individuals. However, the person will first be given a chance to clarify their position. If the mistake is genuine and unintentional, then there will be no penalty. 

If you have multiple PANs, you can surrender the extra ones online using the 'Changes or Correction in existing PAN data / Reprint of PAN card' form. 

Technology Takes Charge 

The Income Tax Department is now using advanced technology like Artificial Intelligence (AI) and data analytics to identify PAN misuse. They are actively monitoring: 

• High-value transactions made with inactive PANs 

• Wrong or fake refund claims 

• Income tax returns filed using inactive PANs 

Officials state that their AI-based system automatically flags such cases and can even block relevant transactions, leading to active enforcement. 

Read more: ITR Filing 2025: Here’s Why You Must Declare F&O Losses   

Conclusion 

If your PAN is not yet linked with Aadhaar, it's urgent to do so. Failing to link could lead to serious consequences, including: 

• Your PAN being suspended 

• Bank or demat accounts being frozen 

• Tax refund claims being rejected 

• Inability to file income tax returns 

The push towards linking Aadhaar and PAN is part of the government's larger plan to strengthen identity verification and combat tax evasion. In an era of digital surveillance and real-time monitoring, using an inoperative PAN is a high-risk gamble. Every unlinked transaction could now cost you dearly. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.