On many lawn tractor models the wiring is a bit different than you would expect.
Yours is likely the same.
For the pto electric clutch, +12 volts is supplied to it all the time the key is ON.
When you use the switch to engage the clutch, you are providing a path to ground so that safety switches etc can easily be in the ground circuit. Also, the relay that shuts down the mower deck when you back up, cuts the ground thus disengaging the electric pto clutch.
The dash display is just a simple low voltage electronic sensor and is stupid.
It has a need for a ground and a power wire. If the overall ground for the many things on the tractor is using a corroded connection to the frame, and the low voltage indicator is likely using the same ground, then when you engage the pto clutch, the grounding of the clutch may be enough to just engage but it is also providing some voltage to the ground for the dash indicator causing it to illuminate.
Check for a green wire attached to the tractor fame or a green wire connected to the negative battery terminal. It will be a light gauge wire.
This cub cadet wiring diagram is not an exact image of what will be where on the tractor. Its purpose is to show the function of various circuits so it does not show the voltage sensor ground and the pto clutch ground being tied together and connect to the frame or negative battery terminal.
If you have a cheap, less than $10 multimeter to measure the battery voltage, you will find it around 14 volts when the engine is running and the pto engaged but the dash light will be on which is why I say it is a stupid device.
Dave
M7040