PAN Aadhaar Linking for NRI: Is it Mandatory? (New Deadline 30 June 2023)

PAN Aadhaar Linking for NRI: The above mentioned guideline was notified under the section 234H of the Income Tax Act, 1961 as a part of the Finance Bill 2021 (effective from 01.04.2021). While it is compulsory for resident Indians, let’s find out whether a PAN card for NRIs need to be linked with the Aadhaar card. Section 234H says:

• A fee of Rs.1,000/- to be levied on individuals who defaults in linking the Aadhaar Card to the PAN Card. 
• It comes as a specific penalty for non-compliance with provisions of section 139AA(2) that was introduced by amending the Finance Bill 2021 on 23rd March 2021.

Now, NRIs are worried about this penalty and have constantly been asking about PAN Aadhaar Linking. Since, most of them don’t have an Aadhaar card, this doubt becomes more and more legit! Let’s take a look at the summary of some of the sections in the Income Tax Act and create a sequence that will enable us to understand whether linking of the PAN Card with Aadhaar Card is mandatory for an NRI or not.

Section 139AA (1)

If a person is eligible to obtain an Aadhaar Card (Number), then it is mandatory to quote the Aadhaar Number or the 28 digit enrolment id while applying for Permanent Account Number (PAN) Card in form 49A (for Indian Nationals) and while filing their Income Tax Returns.

Section 139AA (2)

For every person who is eligible to obtain an Aadhaar Card, it is mandatory to link the Aadhaar Card with the PAN Card before the prescribed due date. 

Important Pointers:

• The due date was extended to 31st June, 2023 from the previous date 31st March, 2022 by the central government.
• Failing to link Aadhaar and PAN Card will result in the PAN Card being inoperative /invalid.
• The individual with an ineffective PAN Card shall be liable to face consequences as if he had not applied/allotted/furnished/quoted the PAN Card.

PAN Aadhaar Link for NRI: Is it mandatory to link PAN card with Aadhaar for NRI?

Section 139AA (3)

As per the [notification number 37/2017, F. No. 370133/6/2017-TPL], the government notifies that the provisions of the section 139AA shall not apply to an individual who does not possess the Aadhaar number or the Enrolment ID and is:-

• Residing in the States of Assam, Jammu and Kashmir and Meghalaya;
• A non-resident as per the Income-tax Act, 1961;
• Of the age of eighty years or more at any time during the previous year;
• Not a citizen of India.

However, to avoid any potential tax or legal complications in India, NRIs should also link their PAN card with Aadhaar card.

Conclusion: This simply translates to the fact that if you are an NRI, a Foreign Citizen, a super senior citizen, or an individual from Assam, J&K and Meghalaya, then it is not mandatory for you to obtain an Aadhaar and hence it is not mandatory for NRIs to link it to the PAN Card with Aadhaar number. But linking Aadhaar with PAN will be of benefit to each Aadhaar and Pan Card holder.

Quick Question: Is it possible to link PAN with Aadhaar after it becomes inoperative/ invalid?

Answer: YES! You can link your PAN Card with Aadhaar after it has become inoperative. Your PAN Card will become active once again as soon as it gets linked to the Aadhaar Card. 

Note: The penalty/fees u/s 234H  shall be levied when the person will link/intimate the Aadhaar after it becomes inoperative.

Aadhaar Enrolment for NRIs and OCIs: An Overview

Only Residents of India are required to enroll for an Aadhaar Card and it is mandatory for them to obtain one. NRIs can enroll for an Aadhar Card if they want to but it isn’t mandatory for them to do so. In 2019, the government removed the 182 days waiting period for NRIs. They can apply for an Aadhar Card when they come to India without any waiting period with an Indian Passport. Also, OCIs who have stayed in India for more than 182 days are eligible to enroll for an Aadhar Card.

“As per Section 139AA of the Income tax Act, 1961, every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July 2017 quote Aadhaar number (i) in the application form for allotment of permanent account number; (ii) in the return of income. 

The above provisions apply to persons who are eligible to get Aadhaar. Under section 3 of the Aadhaar Act 2016, only a resident is entitled to get Aadhaar.

Therefore, the provisions of Section 139AA quoted above regarding linking of Aadhaar to PAN or the requirement of quoting the Aadhaar number in the return shall not apply to a non resident, who is not eligible to get Aadhaar.”

So, here’s a quick recap of what we have learnt in this article:

Consequences of not linking PAN with Aadhaar Card

There are various consequences of not linking PAN and Aadhar Card for eligible individuals under the IT Act 1961, which are:

• Section 206AA: TDS will be deducted at a higher rate
• Section 206CC: TCS would be collected at a higher rate
• Section 234A, 234B, 234C: Taxpayers will not be able to file their ITRs; Penalty of up to Rs.10,000/- u/s 234F
• Section 234H: Taxpayer will only be able to make the PAN operative after linking with the Aadhar Card and paying a fee/penalty of up to Rs.1000/- 
• Section 272B: It is mandatory to quote PAN for certain financial transactions as per section 139A. If the PAN is not linked, it will become inoperative/invalid and this would result in non-compliance with the provisions of Section 139A which would attract a penalty up to Rs.10,000/- u/s 272B.

There are many uses of PAN Card for NRIs, for example to open an NRE/ NRO account you need to have a PAN card. NRIs can choose from the 10 best NRE savings accounts to conduct financial transactions in India.

What to do to make sure that no penalties are levied for PAN Aadhaar Linking for NRI?

In order to get around the issue and avoid any discrepancies, individuals for whom it isn’t mandatory to obtain an Aadhar Card (NRIs and OCIs living abroad) must do the following to avoid any chances of penalties or non-operation of PAN Card by 31st June, 2023:

• Visit your Income Tax e-filing portal
• Visit “My Profile” Section
• Under Contact details change your Residential Status to Non-Resident

PAN and Aadhaar Link for NRI: Get Expert Assistance

Even after understanding all the relevant sections of the Income Tax Act, it can sometimes become confusing considering individual cases and requirements of various NRIs. In such circumstances, you need the assistance of an expert. At SBNRI, we understand this struggle. You can connect with our Taxation Expert directly on WhatsApp using the button below for complete end to end assistance with the execution of the PAN Aadhar Linking for NRIs. Also visit our blog and Youtube Channel for more details.

FAQs