PAN-Aadhaar linkage

A demat account cannot function on an incomplete identity record. If an eligible holder does not link PAN with Aadhaar within the time SEBI allows, the consequence is not a warning letter — it is a frozen account.

The workbook calls this an inoperative PAN, and it comes with real restrictions: the account cannot be debited or credited until the linkage is fixed.

The workbook's own words: "Where eligible demat account holders fail to link their PAN with Aadhaar within the specified time period, such demat accounts will become KYC non-compliant (i.e. inoperative PAN) and will have restrictions on Debit and Credit transactions."

The passage does not state what the specified time period is — only that a deadline exists and that missing it triggers the restriction. Where the workbook gives no figure, the honest answer states that, rather than reaching for a deadline from outside this text.

A divergence you should know about, and must not answer with in this paper. Cross-reference, not from the II-A workbook: Series II-B's workbook (chapter 12, section 12.4.2, page 168) carries SEBI's circular dated 14 May 2024, under which PAN-Aadhaar linkage is disconnected from ascertaining the KYC status. On that later text, a client whose linkage is not verified is still allowed to transact with the existing intermediary, subject to a valid PAN, and what he loses is KYC portability across the securities market — not the use of his account. The II-A passage above, which ties an unlinked PAN to a KYC-non-compliant, debit-and-credit-restricted demat account, has not been updated for that circular.

So there are two positions in print, and they are not the same:

The II-A exam is set from the II-A workbook, so answer the first row here. Know the second because it is the current rule and because the II-B paper tests it.

Mr. Fernandes holds 2,000 shares of Konkan Shipping Ltd worth Rs 8,40,000 in his demat account, but has never linked his PAN with his Aadhaar. Once his PAN turns inoperative for this reason, two things happen at once: he cannot sell the 2,000 shares (a debit is blocked), and if the company declares a dividend and tries to credit it to his account, that credit is blocked too, even though he remains, in substance, the beneficial owner throughout.

He regains full use of the account only once he completes the PAN-Aadhaar linkage and the depository lifts the restriction — the shares themselves are never at risk, but they are, for that period, frozen exactly where they sit.

Chapter 11, section 11.2 (Constituents of the Depository System), under the depository participant's KYC responsibilities. Expect a question on the consequence of missed linkage (debit and credit restrictions on the demat account) rather than on the linkage deadline itself, which this workbook passage does not supply.

• The workbook does not give the linkage deadline — do not import one from general knowledge when answering strictly from this text.
• Both debits and credits are restricted, not just sales — even a dividend credit can be blocked.
• "Inoperative PAN" is the workbook's own term for this KYC-non-compliant state; it is a status of the PAN, with the demat account restriction as its consequence.
• Two papers, two positions — keep them apart. II-A ties an unlinked PAN to a restricted demat account; II-B's chapter 12 carries SEBI's 14 May 2024 circular, under which linkage no longer decides KYC status and the client loses only portability. Answer each paper from its own workbook.
• Even on the later circular, the linkage is not irrelevant — II-B's chapter 11 still attaches higher TDS to a PAN not linked with Aadhaar, without quantifying the rate.