CBDT Notification No. 26/2025 Sets 31 December 2025 Deadline for PAN Holders Using Aadhaar Enrolment ID

On 3 April 2025 the Central Board of Direct Taxes issued Notification No. 26/2025, and it carries a hard stop that most PAN holders have never heard of: 31 December 2025. If you were allotted a Permanent Account Number using an Aadhaar enrolment ID rather than the actual Aadhaar number, you have until that date to intimate your real Aadhaar number to the tax authorities. Miss it, and your PAN turns inoperative from 1 January 2026, with consequences that begin the moment your next refund or salary credit is processed.

This is a narrow rule with wide reach. Enrolment IDs were quoted on PAN applications mostly between 2017 and 2019, when the Aadhaar number itself had not yet been generated for the applicant. The 31 December 2025 deadline in Notification No. 26/2025 now closes that gap under section 139AA(2A) of the Income-tax Act 1961. Below is what the section actually requires, a worked example of what an inoperative PAN costs, and the mistakes that surface most often in Income Tax Department correspondence.

What the Section Says

Section 139AA of the Income-tax Act 1961 has, since 1 July 2017, required every person eligible to obtain an Aadhaar number to quote it when applying for a PAN and when filing a return of income. Sub-section (2) deals with people who already held a PAN on 1 July 2017: they must intimate their Aadhaar number by a date the government notifies, failing which the PAN becomes inoperative. That linking deadline was last extended to 30 June 2023, after which a fee of Rs 1,000 applied to late linking, per the Income Tax Department's Link Aadhaar FAQ.

Notification No. 26/2025, dated 3 April 2025, operationalises sub-section (2A), a distinct limb. It targets a specific group: individuals who, when they applied for PAN, quoted the Aadhaar enrolment ID (the 28-digit acknowledgement slip issued at the enrolment centre) instead of the 12-digit Aadhaar number itself. The notification requires those holders to intimate their actual Aadhaar number to the Principal Director General of Income-tax (Systems) or the person authorised, on or before 31 December 2025. This is the editor-curated statutory position, and it matches the Income Tax Department's own Link Aadhaar FAQ, which records a "further extension to December 31, 2025" for PAN obtained using an Aadhaar enrolment ID.

The stakes are set out in rule 114AAA and the proviso to section 139AA(2). Once a PAN is inoperative from 1 January 2026, four things follow, all confirmed by the Income Tax Department FAQ:

Two categories of payees feel this first. Under section 206AA, where a valid, operative PAN is not available, the deductor must withhold at the higher of the rate specified in the relevant provision, the rate in force, or 20 per cent. Under section 206CC, the collector must levy at the higher of twice the specified rate or 5 per cent. An inoperative PAN is treated for these purposes as if no PAN had been furnished.

Importantly, the obligation under Notification No. 26/2025 does not fall on everyone. The Income Tax Department FAQ lists the categories for whom Aadhaar-PAN linkage is not mandatory: residents of Assam, Jammu and Kashmir and Meghalaya; individuals who are non-resident under the Income-tax Act; individuals aged 80 years or more at any time during the previous year; and individuals who are not citizens of India. These exemptions, first notified in 2017, continue to apply in 2025-26. An exempt person may still link voluntarily on payment of the Rs 1,000 fee.

Worked Example

Consider Ananya, a freelance management consultant. In 2018 she applied for her PAN quoting her Aadhaar enrolment ID because her Aadhaar number had not yet been generated. She never went back to intimate the actual number, and she is not in any exempt category. As of 1 January 2026, her PAN is inoperative.

In February 2026 she raises an invoice of Rs 10,00,000 on a company for professional services. With an operative PAN, the company would deduct tax at source under section 194J at 10 per cent, that is Rs 1,00,000, and pay her Rs 9,00,000. Because her PAN is inoperative, section 206AA forces the company to deduct at the higher of the section rate (10 per cent) or 20 per cent. The company deducts Rs 2,00,000.

The Rs 1,00,000 of extra TDS is not a penalty in the strict sense; it is excess tax that Ananya would ordinarily reclaim as a refund after filing her return for assessment year 2026-27. But here the second consequence bites: under rule 114AAA, no refund is issued while the PAN remains inoperative, and no interest under section 244A accrues for that period. So the Rs 1,00,000 sits with the government, earning her nothing, until she links her Aadhaar and the PAN is reactivated. You can see the mechanics of ordinary deduction on Oquilia's TDS calculator, and model the slab-based tax on the consultancy income with the income tax calculator.

The fix costs Rs 1,000. Rule 114 and the Income Tax Department FAQ require a fee of Rs 1,000 to be paid before intimating Aadhaar after the free window closed on 30 June 2023. Once Ananya pays the fee and intimates her actual Aadhaar number, the PAN becomes operative again, typically within 7 to 30 days, after which refunds and interest resume prospectively. For a definition of the refund that is withheld in the meantime, see the Oquilia glossary entry on tax refund.

Common Mistakes

Assuming an enrolment-ID PAN is already linked. Many holders linked their Aadhaar number before 30 June 2023 and believe the matter is closed. Notification No. 26/2025 is specifically about PANs issued against an enrolment ID; the department's records may still show the enrolment ID rather than the Aadhaar number. Check your PAN status on the e-filing portal: if it reads "PAN inoperative" or flags an enrolment-ID mismatch, the 31 December 2025 deadline applies to you.

Confusing the 2A deadline with the earlier linking deadline. The broad section 139AA(2) linking deadline was 30 June 2023, after which the Rs 1,000 fee applied. The enrolment-ID intimation under sub-section (2A) is the separate 31 December 2025 date set by Notification No. 26/2025. Treating one as satisfying the other is the single most common error in this area for 2025-26.

Ignoring the TDS trap until return-filing season. Taxpayers often discover the problem only when they file for assessment year 2026-27 and find excess TDS they cannot recover. By then the deductions at 20 per cent under section 206AA and the refund freeze under rule 114AAA have already occurred for every payment made from 1 January 2026 onward. The deductor is within the law; the remedy is to link first.

Wrongly claiming an exemption. The exemptions under the 2017 notification are narrow: residence in Assam, Jammu and Kashmir or Meghalaya, non-resident status, age 80 or above during the previous year, or non-citizenship. A taxpayer who merely has an address in one of those states but is assessed as a resident elsewhere should not assume the carve-out applies. When unsure, link and pay the Rs 1,000 fee rather than risk an inoperative PAN from 1 January 2026.

Overlooking downstream TCS. Section 206CC applies the higher collection rate to transactions such as foreign remittances under the Liberalised Remittance Scheme and purchases of goods above threshold. A consultant or trader with an inoperative PAN faces not only 20 per cent TDS under section 206AA but also collection at twice the rate or 5 per cent under section 206CC, compounding the cash that is locked up from 1 January 2026.

FAQ

Who exactly is covered by Notification No. 26/2025?

Only individuals who obtained a PAN by quoting their Aadhaar enrolment ID on the PAN application, instead of the actual 12-digit Aadhaar number. If you quoted your real Aadhaar number when you applied, you are not the target of the 31 December 2025 intimation, though the general section 139AA(2) linking rule may still apply. The source of the rule is CBDT Notification No. 26/2025 dated 3 April 2025.

What happens on 1 January 2026 if I do nothing?

Your PAN becomes inoperative. From that date the Income Tax Department FAQ confirms four consequences: no refund is issued, no interest on refunds accrues, TDS is deducted at the higher rate under section 206AA, and TCS is collected at the higher rate under section 206CC.

How much higher is the TDS?

Under section 206AA, deduction is made at the higher of the rate in the relevant provision, the rate in force, or 20 per cent. For a payment that would normally attract 10 per cent under section 194J, that means 20 per cent, double the usual deduction, as shown in the worked example above.

Can I still fix it after 31 December 2025?

Yes. The PAN is not cancelled; it is inoperative. You can intimate your actual Aadhaar number after the deadline, pay the Rs 1,000 fee required under rule 114 since 30 June 2023, and the PAN is reactivated, after which refunds and correct TDS rates resume prospectively. Deductions already made at 20 per cent from 1 January 2026 are recovered through your return once the PAN is operative.

I live in Assam. Am I exempt?

The Income Tax Department FAQ lists residents of Assam, Jammu and Kashmir and Meghalaya among the categories for whom linkage is not mandatory. However, exemption turns on how you are assessed, not merely your postal address. If you are assessed as a resident in a non-exempt state, the 31 December 2025 obligation can still apply. When in doubt, link.

Does this affect my assessment year 2026-27 return?

Yes. An inoperative PAN from 1 January 2026 means excess TDS withheld during the year cannot be refunded until the PAN is reactivated, even after you file your return for assessment year 2026-27. See the glossary entry on assessment year for how the filing period maps to the financial year, and the entry on TDS for how credit flows to your return.

Where can I verify all of this officially?

The primary sources are CBDT Notification No. 26/2025 dated 3 April 2025 on incometaxindia.gov.in, the Income Tax Department's Link Aadhaar FAQ on incometax.gov.in, and the bare text of section 139AA of the Income-tax Act 1961 on indiacode.nic.in. Do not rely on secondary summaries for a deadline that turns your PAN inoperative.