Union Finance Minister Nirmala Sitharaman Friday proposed to make the permanent account number (PAN) card and Aadhaar interchangeable, effectively allowing those not possessing a PAN to file income tax returns by quoting their Aadhaar number. The proposal will come into effect September 1.Prevailing income tax laws mandate tax filers to quote a PAN number. Additionally, from April 1 this year, the government made it mandatory to quote Aadhaar number and link it to PAN while filing income-tax returns.
“More than 120 crore Indians now have Aadhaar. Therefore, for ease and convenience of taxpayers, I propose to make PAN and Aadhaar interchangeable and allow those who do not have PAN to file Income Tax returns by simply quoting their Aadhaar number and also use it wherever they are required to quote PAN,” said Sitharaman, while delivering her maiden Budget.
The memorandum of the Budget pointed out that it was observed that in many cases, people involved in high value transactions, such as purchasing foreign currency or huge withdrawals from banks, did not possess a PAN. To keep an audit trail of such transactions and widening the tax base, the amendments to the Income Tax Act have been proposed.
Further, existing provisions of the Income Tax Act note that the PAN allotted to a person shall be deemed invalid, if the person fails to intimate the Aadhaar number, on or before the notified date.
“In order to protect validity of transactions previously carried out through such PAN, it is proposed to amend the said proviso so as to provide that if a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner,” stated the Budget memorandum.
“Interchangeability of PAN and Aadhaar, pre-filled tax forms, e-assessments, are in line with the objective to ease tax administration and create greater transparency,” said Parizad Sirwalla, Partner and Head, Global Mobility Services – Tax, KPMG India.