Income tax refunds worth ₹340 crore of 1.3 lakh taxpayers are stuck. Govt reveals the reason

The government on Monday, March 30, 2026, revealed that several taxpayers have failed to receive their refunds due to a reason that could have been easily avoided.

According to the Ministry of Finance, income-tax refunds worth ₹340 crore of over 1.3 lakh taxpayers are on hold as their permanent account numbers (PANs) have become inoperative due to non-linkage with Aadhaar.

An inoperative PAN makes a taxpayer ineligible to receive an income-tax refund. One can make his/her PAN operative again by linking to Aadhaar.

"In respect of cases where PANs are in inoperative status, returns of income filed are processed and also credit for pre-paid taxes claimed in the returns are allowed. However, refunds arising from processing of these returns are withheld as per provisions of Sec. 139AA of the Income Tax Act, 1961 read with Rule 114AAA of the Income Tax Rules, 1962," the Union Minister of State for Finance, Pankaj Chaudhary, said in a written reply to a query in the Lok Sabha on Monday, March 30, 2026.

"The number of such refund cases kept on hold in respect of inoperative PAN status is 1,30,638 and the amount involved is Rs. 340.30 crores," he added.

The minister shared the above in response to a query on "The number of Income Tax Returns (ITRs) not processed, TDS/TCS credits denied, and refunds withheld due to inoperative PAN status, along with the aggregate monetary value involved."

According to the Income-tax rules, Aadhaar-PAN linking is mandatory for individual category of taxpayers. PAN becomes inoperative if it is not linked to Aadhaar.

As of January 1, 2026, there were over 9.25 crore inoperative PANs in the individual category. The Government has also collected ₹2,338.31 crore as late fees for delayed linking of PAN with Aadhaar till March 23, 2026, according to the minister.

"Aadhaar-PAN linking is mandatory only for Individual category of taxpayers. The total number of Individual Category PANs, which were inoperative as on 1st January, 2026 is 9,25,50,668. The total amount of late fees collected for delayed linking of PAN with Aadhaar, as on 23.03.2026 is Rs. 2,338.31 Crores," he said.

PAN inoperability, refund blockage grievances

There were 1114 grievances related to PAN inoperability, refund blockage, or portal malfunction during the period in 2024-25. This increased to 1156 in 2025-26.