8 Typical Financial Transactions Still Possible Despite an Inactive PAN Card

The deadline for linking PAN and Aadhar has ended and people who could not link within the deadline are still able to do some transactions. The inactivity of a PAN card carries several implications, such as being unable to invest in bank fixed deposits and mutual fund schemes, as well as being unable to file ITR or claim tax refunds. 

Nevertheless, specific financial transactions remain possible even with an inactive PAN, albeit with higher tax deductions at source (TDS) and tax collection at source (TCS).

Under Section 206AA of the Income Tax Act, 1961, if a tax deductee fails to provide their PAN (which could be due to the PAN being inactive), the tax deductor (the payer of the income) is obligated to deduct tax at a rate of 20% in transactions subject to TDS. 

Similarly, Section 206CC stipulates a higher rate of TCS, twice the specified rate or 5% (whichever is higher), in cases where the PAN is not furnished or the PAN is inactive. It's important to note that the Budget 2023 has introduced an amendment to the Income Tax Act, stating that starting from July 1, 2023, the maximum rate of TCS under Section 206CC cannot exceed 20%, even if the individual has not furnished their PAN.

 Transactions That Can Still Be Conducted

Here are the financial transactions that can still be conducted, although with higher TDS or TCS, even if the PAN card becomes inactive:

1. Receiving interest income from bank fixed deposits or recurring deposits, provided the total interest received exceeds Rs 40,000 (Rs 50,000 for senior citizens) in a financial year (higher TDS).
2. Selling immovable property with a sale value or stamp duty value exceeding Rs 50 lakh per transaction (higher TDS).
3. Purchasing a car with an amount exceeding Rs 10 lakh (higher TCS).
4. Withdrawing money from an EPF account if the amount exceeds Rs 50,000 and TDS is applicable (higher TDS).
5. Paying rent to a landlord if the monthly rental exceeds Rs 50,000 per month (higher TDS).
6. Engaging in the sale of goods and services where the transaction amount surpasses Rs 50 lakh (resulting in an elevated TDS).
7. Making payments for contract work, such as hiring an interior designer, if the amount exceeds Rs 30,000 for a single contract or Rs 1 lakh in total (higher TDS).
8. Receiving commission or brokerage payments that exceed Rs 15,000 (higher TDS).

While the Income Tax Act includes numerous transactions subject to TDS, the aforementioned transactions are prevalent financial activities that directly affect individuals on a daily basis.

Also Read: Delhi ITAT: Rental Income from Car Parking is Deductible Under Section 80IA

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