Are you ignoring messages from your bank regarding KYC? Beware ! It might freeze your banking services. Read to know why.

Recently, the citizens are receiving messages from their respective banks requesting to update the Know Your Customer (KYC) Details.

We often receive numerous business and promotional messages from various companies and banks. It seems pretty annoying at times and we tend to ignore them. What, once again? This process was once already done in 2016-17 when the BJP led NDA government took measures to curb black money by announcing de-monetization.

If you do not link your Permanent Account Number (PAN), you may experience disruptions in your banking services, credit card payments, debit card transaction, online transactions through mobile banking and UPI, even higher tax deduction at source (DTS) on your interest, dividend, and other incomes, the discontinuation of your systematic investments, and your trading and demat accounts may become inoperative or inactive. Why?Beware of Fraudulent SMS & Calls about KYC suspension or expiration, Account Block and Fake Rewards! | Paytm Payments Bank Blog

This is because, as of June 30, 2021, new modifications to the Income Tax Rules make it essential to link Aadhaar with PAN. If the PAN is not connected to Aadhaar, it will be termed inactive / invalid on July 1, 2021, in accordance with Rule 114AAA(3) of the Income-tax Rules, 1962 (‘Rules’).

Where the PAN provided to the deductor is inoperative/invalid, it is deemed that the deductee has not furnished his PAN to the deductor, and the provisions of subsection 206AA(1) (consequential withholding at a higher rate) apply accordingly, according to section 206AA(6) of the Income-tax Act, 1961 (‘Act’).

As a result, when PAN has become inoperative/invalid due to non-linking with Aadhaar, TDS will be deducted at a higher rate of 20% as per section 206AA of the Act, as under Rule 114AAA(3) of the Rules.

The increased TDS rate of 20% will be deducted solely for income that is currently subject to TDS, such as interest on fixed deposits and dividends. There will be no effect when TDS is not applicable.

Because tax deduction is the payer’s responsibility, you must provide the necessary information to the appropriate authorities – such as banks and Post Offices for interest income, companies for interest and dividend income, Asset Management Companies (AMCs) for dividend on Mutual Fund (MF) schemes, and so on – after the linking is completed to ensure that higher TDS is not applied to your income.Have not linked your PAN card with Aadhaar? Follow step-by-step guide to do it on new e-filing portal 2.0

As a result, you must comply within the time limit, because once greater tax is taken, the payer may not process / conduct any refunds/adjustments at a later date, and you must claim the refund of the excess tax deducted when completing your Income Tax Return (ITR).

Remember that under Section 139 AA of the Income Tax Act 1961, everyone who has been assigned a PAN and is eligible to receive an Aadhaar number must update their Aadhaar number to the Income Tax Department (PAN-Aadhaar Linkage) by June 30, 2021, unless the deadline is extended further.

By linking your PAN and Aadhaar, you will be able to:PAN Card, Aadhaar Card Linking Deadline Is June 30: How to Check Status, Link Aadhaar-PAN Online | Technology News

  • Maintain the functionality of your PAN.
  • Transactions in the banking system run smoothly
  • To keep your credit card services running smoothly
  • Avoid paying a larger TDS on the interest you’ve earned (if applicable)
  • Avoid paying a greater TDS (a 20% deduction) on a dividend that has been announced.
  • Avoid having your Trading and Demat Accounts go dormant.

Sanjana Simlai

Hey, this Sanjana. Am from Kolkata. Reading, writing and travelling have always attracted me. I am always ready to learn and look forward to opportunities that would enhance my career in Journalism. I spend my free time in clicking pictures with my Nikon DSLR and I find solace in poetry.

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