The Income Tax Department of India has recently implemented a novel scheme to link the Permanent Account Number (PAN) and Aadhaar. The crux of this arrangement is to simplify the process of obtaining a PAN for taxpayers, using their Aadhaar number. This system will eliminate the need for additional applications or document submissions from the taxpayer’s end.
The Mechanism
Under this new scheme, the department will glean demographic information from the Unique Identification Authority of India (UIDAI) to allot a PAN. No additional documentation or application from the taxpayer is necessary for this process. The PAN will be automatically issued to those filing returns with their Aadhaar number.
Understanding PAN and Aadhaar
It’s important to understand the distinction and correlation between PAN and Aadhaar. While the UIDAI issues Aadhaar, PAN is a 10-digit alphanumeric identification that the Income Tax Department assigns to individuals, companies, or entities. The PAN plays a crucial role in enabling the department to link all transactions of the person with the department. These transactions can include tax payments, TDS/TCS credits, returns of income, specified transactions, correspondence, and more. Essentially, PAN acts as the identifier for the person within the tax department.
Aadhaar, on the other hand, carries vital information of an individual including name, date of birth, gender, photo, address, and biometrics. This data set is also required to obtain a PAN.
| PAN | Aadhaar |
|---|---|
| 10-digit alphanumeric number | Unique 12 digit number |
| Issued by Income Tax Department | Issued by Unique Identification Authority of India |
| Links all transactions of a person with the department | Contains vital demographic and biometric information of a person |
| Used for filing tax returns, among other things | Can be used to file tax returns, as per new rules |
Interchangeability of PAN and Aadhaar
In a recent announcement by the Finance Minister in her Budget speech, an important development to note is that the government is now aiming to make PAN and Aadhaar interchangeable. This means individuals who do not have a PAN can file I-T returns by simply quoting their Aadhaar number. Furthermore, they can use it wherever they would typically need to provide their PAN.
The introduction of this scheme is primarily targeted at improving tax compliance in the country whilst making the life of the taxpayer simpler. With this move, the government hopes to bridge the gap between the Aadhaar and PAN card holding population, thus reaching out to a larger taxpaying base.
