You send a ₹1,00,000 invoice to a new client, and the payment arrives ₹20,000 short. Your accountant looks at your PAN and says it is inoperative. Most freelancers find out this way, after the money has already been cut, because nobody checks the status of a PAN they got years ago and use every day.
An inoperative PAN is one that is not linked to Aadhaar, and it costs you in three places: a higher TDS rate, withheld refunds and TDS credit that may not reach your 26AS. This post explains who it applies to, what it does to your income as a freelancer, how to check your status without logging in, and how to make the PAN operative again.
Check your PAN status first, because it takes a minute
The Link Aadhaar Status check on the income tax e-filing portal tells you whether your PAN is linked, and it needs no login. Enter your PAN and Aadhaar number and the portal shows the result. Do this before you onboard a new client and again before you file your return, because the client deducts tax based on your PAN status when they pay you.
Who this applies to, and who is exempt
The general rule is that a PAN not linked to Aadhaar becomes inoperative. CBDT Circular 03/2023, reproduced on staffnews.in, explains that the PAN stays unusable for the purposes of the Act until it is made operative again. The circular says exemption follows section 139AA(3) of the 1961 Act, which covers non-resident Indians, non-citizens, people aged 80 or over, and residents of Assam, Meghalaya and Jammu and Kashmir or Ladakh.
There is also a narrower deadline. Notification 26/2025, dated 3 April 2025, required PANs allotted through an Aadhaar Enrolment ID before 1 October 2024 to be linked to a real Aadhaar by 31 December 2025. Outlook Money reported that such PANs become inoperative from 1 January 2026. That 31 December 2025 date applied to Enrolment-ID PANs, not to every taxpayer. If you are unsure which group your PAN belongs to, the status check above settles it.
It pushes TDS up to at least 20 percent
When your PAN is inoperative, the client deducting tax on your fee applies the higher rate under sections 206AA and 206CC of the 1961 Act. That is the higher of the specified rate, the rate in force, or 20 percent. So the deduction is at least 20 percent, and it can be more. It is not always a flat 20 percent. These section numbers are from the 1961 Act, which the Income-tax Act 2025 replaced from 1 April 2026.
The 10 percent in the illustration is an assumed normal rate, so replace it with the rate that applies to your payment. The gap of ₹10,000 is not a penalty. It is your own tax paid early, and it comes back only through your return, after the PAN is fixed. Meanwhile it is cash you do not have. The guide to TDS when a client hires a freelancer covers what the client owes on their side.
Refunds, 26AS credit and the forms you cannot use
With an inoperative PAN, the tax department holds your refund and pays no interest for the period the PAN stays inoperative. Protean says TDS and TCS credit may not show in Form 26AS until you fix it, and banks will not accept Form 15G or 15H. That matters if you use those forms to stop TDS on bank interest, as the guide to Form 121, 15G and 15H explains.
Whether the portal lets you file with an inoperative PAN is not settled in the CBDT circular, so check the portal before you try. What the circular does state is the refund and credit effect. If your refund has stalled, check your PAN status before you chase anything else. The guide on an income tax refund delayed for freelancers lists the other causes.
How to make an inoperative PAN operative
The fee is ₹1,000, paid on the e-Pay Tax page of the e-filing portal, and then you submit the Link Aadhaar request. The fee ties to section 234H. After payment and linking, the status usually turns operative in 7 to 30 days, and the portal sets no fixed timeline. Higher TDS keeps applying until the status changes.
What to do when a client has already deducted at the higher rate
Once a client has deducted at the higher rate, you cannot argue them down. Fix the PAN, then claim the credit and any refund through your return. If a payment is due before the status changes, expect the higher deduction and claim the excess through your return once the PAN is operative. If the credit is missing from your 26AS, the guide on TDS missing from 26AS shows how to trace it.
If your PAN came through an Aadhaar Enrolment ID and you did not link by 31 December 2025, it has been inoperative since 1 January 2026, so check it before your next invoice goes out. Check your status and the current fee on the e-filing portal before you act.
Rinto creates GST-ready invoices with automatic IGST/CGST/SGST calculation, and you mark each invoice paid yourself once the money lands, so you can compare what a client paid with what you invoiced. Rinto does not file returns or give tax advice. This post is general information, not tax advice.
Frequently Asked Questions
How do I check if my PAN is inoperative?
Use the Link Aadhaar Status service on the income tax e-filing portal. It needs no login. Enter your PAN and Aadhaar number, and the result tells you whether the two are linked. If they are not linked, the PAN becomes inoperative under Rule 114AAA, according to CBDT Circular 03/2023. A PAN can be exempt from the linking rule if the holder is an NRI, a non-citizen, aged 80 or over, or a resident of Assam, Meghalaya or Jammu and Kashmir or Ladakh. Do this before you invoice a new client.
What is the fee to link PAN with Aadhaar now?
The fee is ₹1,000, paid on the e-Pay Tax page of the e-filing portal before you submit the Link Aadhaar request. The fee ties to section 234H. Confirm the amount on the e-Pay Tax page before you pay. If the status check shows your PAN is already linked, you have nothing to pay. After payment and linking, the status usually turns operative in 7 to 30 days, and higher TDS keeps applying until it does. Paying the fee does not change the status instantly, so a client who pays you in that window may still deduct at the higher rate.
Will TDS be deducted at 20% if my PAN is inoperative?
At least 20 percent. Sections 206AA and 206CC of the 1961 Act apply the higher of the specified rate, the rate in force, or 20 percent when the PAN is inoperative. So on a ₹1,00,000 fee where the normal rate would be 10 percent, the deduction would be at least ₹20,000 instead of ₹10,000. That example is an illustration, not your rate. The extra tax is not a penalty, but you recover it only through your return after the PAN is fixed, so check the status before the client pays.
Can I file my ITR with an inoperative PAN?
Link Aadhaar first, then file. The CBDT circular lists withheld refunds and higher TDS as the effects of an inoperative PAN, and it does not mention a filing block. Check the portal if you are unsure, and link before the filing deadline so your refund is not held back with no interest. Linking takes a fee of ₹1,000 and usually 7 to 30 days to take effect, so start well before the deadline. With the PAN still inoperative, the tax department holds any refund and pays no interest for that period, and TDS credit may not show in your Form 26AS. Linking first protects both.
How long does it take for PAN to become operative after linking?
After you pay the fee and submit the Link Aadhaar request, the status usually turns operative in 7 to 30 days, and the portal sets no fixed timeline. Higher TDS applies until the status changes, so a client who pays you in that window may still deduct at the higher rate. Check the Link Aadhaar Status page for progress. If a payment is due before the status changes, expect the higher deduction and claim the excess through your return once the PAN is operative.