The budget also proposes to issue Aadhaar cards for Non-Resident Indians with Indian passports.

Budget 2019 For filing IT returns PAN and Aadhaar will soon be interchangeable
Money Budget 2019 Friday, July 05, 2019 - 17:08

Aadhaar can soon be used for more things, if the amendments proposed in Budget 2019 are made reality. Finance Minister Nirmala Sitharaman proposed to make PAN card and Aadhaar card “interchangeable”, in order to allow those without PAN card to file their income tax returns.

In her speech, Finance Minister Nirmala Sitharaman said, “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 further stated, “It is proposed to provide interchangeability of PAN and Aadhaar to enable a person who does not have PAN but has Aadhaar to use Aadhaar in place of PAN under the Act. The Income Tax Department shall allot PAN to such person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India (UIDAI). It is also proposed to provide that a person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of PAN under the Act.”

The proposal would enable individuals to use Aadhaar instead of PAN not just for filing IT returns, but for other financial transactions including buying gold, a vehicle, investing in mutual funds etc.  

However, many questioned the use of the term ‘interchangeable’, as the proposal does not mention if the PAN card can be used in places where Aadhaar card is permissible.

The Budget proposes to insert a clause into Section 139A of the Income Tax Act, which states that persons who fall under specific categories have to apply for the allotment of a PAN. The clause that the Budget proposes to insert states that persons who wish to enter specific transactions and do not possess a PAN also have to apply for one. This came after observation that people who do not have a PAN were entering “high value transactions, such as purchase of foreign currency or huge withdrawal from the banks”, and an audit of such transactions was in order. 

It was for this reason that the PAN and Aadhaar was proposed to be interchangeable. The budget states that the proposed amendment will make every person who is required to furnish PAN and who has not been allotted a PAN but possesses Aadhaar, may furnish that in lieu of PAN. Such person shall be allotted a PAN in the prescribed manner.

They also seek that anyone who has PAN and Aadhaar and has already linked may be allowed to use their Aadhaar number in lieu of PAN. 

“The Income Tax Department shall allot PAN to such person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India (UIDAI). It is also proposed to provide that a person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of PAN under the Act,” an annexure to the Budget speech states. 

For these amendments, the Budget also proposes that Section 272B of the I-T Act, which deals with penalty for failure to comply with the provisions of section 139A, be amended. These amendments will take effect from September 1, 2019.

It also proposes to amend sub-section (2) of section 139AA of Income Tax Act that a person who carries out a transaction through PAN and does not intimate their Aadhaar number, the PAN allotted to the person will be made inoperative. This amendment will also take effect from September 1, 2019.

Budget 2019 sought to bring more persons under the ambit of Aadhaar, with the Finance Minister proposing that the identity card be issued to Non-Resident Indians as well. “I propose to consider issuing Aadhaar Card for Non-Resident Indians with Indian Passports after their arrival in India without waiting for 180 days,” the Finance Minister stated. 

This comes one day after the Aadhaar and Other Laws (Amendment) Bill, 2019 was passed by the Lok Sabha, which aims to impose strict penalties for violation of norms set for the use of Aadhaar and violation of privacy. The Bill replaced an ordinance promulgated on March 2. The Cabinet on June 13 approved the Bill which established that no individual can be compelled to provide proof of Aadhaar number unless provided by the law, and that Aadhaar number on a voluntary basis shall be accepted as a KYC document.

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