As of January 1, 2026, failure to link PAN with Aadhaar renders the PAN inoperative, preventing taxpayers from filing Income Tax Returns (ITR), processing pending returns, or receiving refunds.
An inoperative PAN also leads to higher Tax Deducted at Source (TDS/TCS), at rates up to 20%, and disrupts financial activities such as banking, investments, and property transactions.
Impact On ITR Filing And Refunds
Taxpayers with an inoperative PAN cannot file returns on the income tax e-filing portal.
Refunds will not be issued, and any pending refunds will remain on hold until the PAN is reactivated, according to Protean Technologies. Filed returns that are pending will also not be processed, which may delay interest payments on refunds.
Higher Tax Deduction And Loss Of Exemptions
If the PAN remains inoperative, TDS on income such as interest may be deducted at higher rates, often 20% or more.
Taxpayers will also be unable to submit Form 15G or 15H for Nil TDS, resulting in mandatory deductions.
How To Reactivate PAN
An inoperative PAN can be reactivated by linking it with Aadhaar on the Income Tax Department website by paying a penalty fee of Rs 1,000.
ITR Deadlines And Penalties For AY 2025–26
Missing key tax deadlines for Assessment Year (AY) 2025–26 triggers penalties, interest, and loss of benefits. The deadline for filing ITR for non-audit cases was extended to September 16, 2025.
A belated return can be filed by December 31, 2025, but with penalties under Section 234F:
Income above Rs 5 lakh: Rs 5,000 penalty
Income up to Rs 5 lakh: Rs 1,000 penalty
Income below exemption limit: No penalty (Rs 2.5 lakh for most, Rs 3 lakh for seniors)
Interest On Delayed Tax Payments
Under Section 234A, delayed filing with outstanding tax liability attracts interest at 1% per month or part thereof.
Failure to pay at least 90% of advance tax by March 31 or missing instalments under Sections 234B and 234C also leads to a 1% per month interest penalty.
Key Deadlines To Track
- ITR filing (non-audit): September 16, 2025
- Belated/revised return: December 31, 2025
- Advance tax (Q4): March 15, 2025
- Tax-saving investments (Sections 80C, 80D): March 31, 2025
After December 31, only updated returns (ITR-U) can be filed, with additional tax of 25 per cent to 50 per cent.
Loss Of Benefits And Stricter Scrutiny
Missing deadlines can result in the loss of carry-forward of capital and business losses.
Taxpayers may also lose interest on refunds and the option to choose the old tax regime.
Late filers are more likely to face scrutiny notices, and in extreme cases of non-filing under Section 276CC, imprisonment ranging from 3 months to 7 years may apply if the tax liability is substantial.
Other Compliance Deadlines
Missing TDS/TCS statement filings (Q4) can attract a penalty of Rs 200 per day under Section 234E, until it equals the tax amount.
Updated returns (ITR-U) can be filed up to two years from the end of the relevant assessment year, but require payment of additional tax ranging from 25 per cent to 50 per cent.
