Prior to the launch of the ambitious Aadhaar platform, having a universal ID system seemed like a distant dream. While carrying multiple identity documents (such as Voter ID card, PAN card, Drivers’ Licence, Passport and Ration Card) used to be the norm, things have changed for sure. With the push towards Aadhaar-based UID gaining strength, the recent decision to link PAN with Aadhaar is all set to change the way taxes are collected by the Indian government.
How is PAN Different from Aadhaar?
PAN or Permanent Account Number is a 10-digit code comprising letters and numbers that act as unique identifiers for tax authorities. The PAN card is issued by two key government-appointed authorities – UTI and NSDL. As per its use, PAN Card acts as a unique identifier for various financial transactions ranging from mutual fund investments and opening bank accounts to filing taxes and making cash purchases at your neighborhood jewellery store.
Aadhaar, on the other hand, is a universal ID which includes the biometric information – fingerprints and retinal scan of the individual. In the age of digital transactions and e-verfications, Aadhaar is playing a key role as individuals can now get their KYC done online for various transactions such as opening bank accounts (as in the case of DBS Bank and IDFC Bank), getting a new phone SIM card as well as getting e-KYC done for online mutual fund transactions. The Aadhaar card in fact doubles up as both identity and address proof unlike the PAN card, which has no address printed on the card.
How is linking PAN and Aadhaar helpful?
Benefits for Individuals
- Reduced documentation requirements when applying for a range of financial products ranging from bank accounts to mutual fund investments.
- Simplified tax filing for individuals as only a single form will have to be filled out and acknowledgements from multiple agencies will no longer to be required especially in case of the self-employment.
Benefits for the Government
- Further crack down on tax evaders who might have been using multiple PAN cards to evade taxes. Having more than one PAN card has always been illegal, but a few unscrupulous individuals have been using this technique to evade taxes.
- Better tracking of transactions as Aadhaar-based authentications and payment systems become the norm. This is expected to reduce tax fraud drastically as high volume cash transactions are curbed further.
How will Linking PAN to Aadhaar Work?
Aadhaar information is generated based on supporting documents but is backed by biometric information, hence one person can only have a single Aadhaar card/number as the biometric information is unique to a particular individual. Once the exercise of Aadhaar to PAN linkage is completed, each PAN will be linked to a single Aadhaar number making it difficult for tax evaders to continue.
The following are the key steps to link your PAN to your Aadhaar:
- Log on to the e-Filing website (www.incometaxindiaefiling.gov.in) using your user id and password. In case you have not registered yet, you can do so easily using your PAN card number and some other key information.
- On the home screen, you can navigate to the Profile Settings tab and find the Link Aadhaar button as shown below.
- Clicking on the above link takes you to a new page as below:
On this page you can update the Aadhaar information i.e. the card number and click on the “Link Aadhaar” button. You will subsequently receive an OTP on your registered mobile number to confirm the action.
If everything is done correctly and there is no mismatch between the Aadhaar database and the PAN database, you will get an update that your Aadhaar-PAN linking is complete.
Is Linking Aadhaar and PAN Mandatory for All?
The government has made it mandatory to link your PAN to your Aadhaar. However, the following individuals are exempted from linking the two documents:
- One who is not a citizen of India
- Individuals categorised as Non-Resident Indians under the Income Tax Laws
- Individuals who are more than 80 years of age at any time during the tax year
- Residents of the states of Assam, Meghalaya and Jammu and Kashmir
The above mentioned categories of individuals are exempted from linking PAN and Aadhaar only if they do not possess Aadhaar or an Aadhaar Enrolment ID.
Those who have been allotted PAN Card as on 1st July 2017 and are eligible to apply for Aadhaar should intimate the same to the tax authorities otherwise their PAN may also be cancelled at a later date. The government has also given partial relief to those who do not possess Aadhaar and do not wish to obtain one for the time being. Their PAN will not be cancelled as it might lead to other consequences under the Income Tax Act.
It was reported earlier that the last date for linking PAN and Aadhaar was June 30. But the authorities later said that the deadline was not for linking the two documents but for filing returns and applying for a new PAN card without the Aadhaar card.
The move is another small step towards promoting cashless transactions. The introduction of BHIM App and Aadhaar Pay along with the linking of Aadhaar to PAN is an indication of a slow but sure movement towards ensuring tax collections improve in India and tightening the tax net to control tax evasion by individuals.