Aadhaar may replace PAN but is an ‘alternative for now’

Aadhaar, the 12-digit unique identity number, can potentially replace the permanent account number assigned to taxpayers but for now, the biometric ID will only serve as an alternative, two government officials said on Saturday.

Those who do not possess PAN can file their tax returns by quoting the Aadhaar number, finance minister Nirmala Sitharaman said in her budget speech on Friday in a move that’s expected to improve tax compliance in the country. Until now, it has been mandatory to provide PAN details in tax returns.

Aadhaar is an ideal identification tool given that 123 crore of the unique ID numbers have been generated so far in the country of 130 crore. The budget has made a beginning by initially making it an alternative to PAN, and depending on the response of taxpayers, it can replace PAN, one of the two officials said on condition of anonymity.

Sitharaman spoke about the interchangeability of PAN and Aadhaar in her budget speech. “Mr Speaker, Sir, 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,” she had said on Friday.

Asked on Saturday whether Aadhaar could replace PAN, the finance minister said: “No, at this stage it’s more to facilitate, because we have had a lot of people telling me that ‘sorry we don’t have a PAN but does it mean I’ll have to harass myself to get it with a sense of urgency.’”

She agreed that Aadhaar’s universal use would promote “ease of living” for taxpayers, “but can I do it within a day”?.

The minister said a decisions like replacing PAN with Aadhaar would depend on “the mood of the country, the response of the citizen, the technological position”, besides “many other factors”.

Aadhaar has an edge over PAN because, being a biometric ID,.it is difficult for unscrupulous people to fraudulently obtain it or quote a fake number.

Revenue secretary Ajay Bhushan Pandey told PTI on Saturday that Aadhaar could be quoted for cash transactions of more than ₹50,000 and for all other purposes where traditionally PAN has been compulsory.

Banks and other institutions will make back-end upgrades to allow acceptance of Aadhaar in all places where quoting PAN is now mandatory, Pandey said. According to him, there are 22 crore PANs already linked to Aadhaar.

PAN is mandatory for cash transactions such as hotel or foreign travel bills exceeding ₹50,000. PAN is also mandatory on purchase of immovable property worth more than ₹10 lakh.

On whether PAN will be phased out, Pandey told PTI it would not be; people would have a choice to either quote PAN or the Aadhaar number.

“...PAN and Aadhaar both will exist because some people may prefer to use Aadhaar, some people may prefer to use PAN. But at the back-end, for every PAN there will be an Aadhaar.”