No PAN, no problem: Minister allows use of Aadhaar for paying income tax

Union finance minister Nirmala Sitharaman said Friday the government will make the Permanent Account Number (PAN) and Aadhaar interchangeable, a move that is expected to make compliance easier for taxpayers.

“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,” the finance minister said in her budget speech.

It was previously mandatory to provide PAN details to file income tax returns.

Sitharaman also said that pre-filled tax returns will be made available to taxpayers that will contain details of salary income, capital gains from securities, bank interests, tax deductions and other details. Information regarding these will be collected from the sources concerned such as banks, stock exchanges, mutual funds, EPFO and state registration departments.

“This will not only significantly reduce the time taken to file a tax return, but will also ensure accuracy of reporting of income and taxes,” the finance minister said in the Lok Sabha.

ClearTax.com founder and CEO Archit Gupta said Aadhaar has a wider coverage than the PAN card. “There are more Aadhaar [cards] issued than PAN [cards] and so in terms of checking evasion, it may serve better. Besides, people who have been facing issues due to name differences between PAN and Aadhaar will be relieved,” said Gupta.

The move is expected to improve tax compliance. “While this might seem as a good move for income tax department and taxpayers, the government may face an issue. Using Aadhaar may land up the government in complex privacy issues,” said Gupta.

The move came on a day the Supreme Court asked the Centre and the Unique Identification Authority of India to respond to a petition that has challenged the 2019 Aadhaar ordinance.

A bench of justices SA Bobde and BR Gavai issued notices to them on a PIL challenging the validity of Aadhaar and Other Laws (Amendment) Ordinance, 2019 and Aadhaar (Pricing of Aadhaar Authentication Services) Regulations, 2019. The ordinance was published in the Gazette of India in March 2019.

The petitioners have alleged in their plea that the ordinance and the regulations violate the fundamental rights of the citizens guaranteed under the Constitution.

“The impugned ordinance creates a back door to permit private parties to access the Aadhaar ecosystem, thus enabling state and private surveillance of citizens and the impugned regulations permit the commercial exploitation of personal and sensitive information which has been collected and stored for state purposes only,” said the PIL.

(With inputs from agencies)