By making it must to quote Aadhaar number for filing income tax returns and applying for PAN, the government is slowly making it the sole document to be quoted across all financial deals on the same lines as the Social Security Number in the USA
The government has proposed to make it mandatory to quote Aadhaar number while filing income tax returns and applying for PAN. The move has evoked mixed responses across the industry.
The move is aimed at making Aadhaar a single document that can be used to trace all your financial transactions. This points to the fact that the government is slowly making Aadhaar the sole document to be quoted across all financial transactions on the same lines as the Social Security Number in the USA.
In the longer run, this will make tracing black money and “benami” transactions easier.This will provide tax transparency to the government and an audit trail for all transactions.
As a result, all transactions will be linked and the government will be able to resolve all discrepancies easily utilising the database at its disposal. However, PAN will not suddenly become redundant. That will be done in a phased manner.
In the longer run, Aadhaar might become the primary UID number to be quoted while filing returns and it will also be used to auto-populate data when you file your returns online on the ITD website.
The side-effects of demonetisation may have faded away, but the momentum it gave to digitisation and fight against parallel economy is showing no signs of dwindling. In the ongoing Budget session of Parliament, the government has proposed to make Aadhaar mandatory for filing income tax return as well as for applying and retaining PAN.
These proposals have been made through amendments to the Finance Bill. Additionally, it is also lowering the threshold on cash transactions from Rs 3 lakh to Rs 2 lakh, which is in sync with the government’s war against black money.
The government claims that 98 per cent citizens have already been linked with Aadhaar database and the step acts as a warning for all procrastinators. As per proposed amendments, all taxpayers will be asked to quote their Aadhaar UID in their income tax return.
Aadhaar already has 111 crore persons enrolled, while there are only 25 crore PAN holders in the country. The move is expected to help trace all fake PAN transactions where people file returns using multiple fake PAN cards.
A person applying for a new PAN will now need to provide his Aadhaar number. Taxpayers who already have a PAN also need to get their PAN linked with Aadhaar, the due date for which will be announced later. Those who want to apply for PAN will now have to produce their Aadhaar card.
The move is aimed at mapping all your financial and other transactions to your PAN through Aadhaar. The government is taking small steps in a phased manner so that Aadhaar can be used to link all your financial and property transactions. Aadhaar is already linked to most of your financial and property transactions.
Now with PAN and Aadhaar being linked, each transaction will come under the tax department scanner. This means while filing tax returns, taxpayer will have to carefully analyse tax implications of all their financial transactions and report these correctly in the tax return. Failing to report it correctly may immediately attract tax department’s attention.
The move is a major shift from the previous announcement by the government that specified that Aadhaar was voluntary. Quoting it for filing returns and applying for PAN has made it compulsory for all to apply for Aadhaar cards. Foreigners and NRIs staying outside India may face the heat of this move, especially if they need to file income taxes in India since they earn income in India.
But possibly government will soon come with a notification exempting these foreigners and NRIs from the mandatory quoting of PAN. This is a welcome move since it is ultimately going to lead to better monitoring of transactions and unearthing of “benami” transactions to create a black money-free economy.
In the longer run, this will also help the government in bringing down the tax rate through increased tax collection.— The author is Head of Tax Research, H&R Block India. The views expressed in this article are his own.
[Copyright By Chetan Chandak]