IN yet another move to tighten its grip on tax evaders, the government has introduced a new Section 139AA in the Income Tax Act, 1961 by way of amendment to Finance Bill, 2017 passed by Lok Sabha last week.
The new law
Every individual will have to mandatorily quote his Aadhaar number in PAN application form or income tax return form after July 1, 2017. All existing PAN holders will be required to intimate their Aadhaar number to the IT department on or before July 1, 2017. After July 1, all PAN numbers which are not linked to Aadhaar numbers will be invalid.
Why was this needed?
Since a long time, it has been the concern of the Income Tax (I-T) department that many tax evaders have got multiple PAN numbers which they have been using to fragment and conceal their real income. This issue was also highlighted in a CAG report of 2011, after which the government had considered issuing biometric PAN cards to taxpayers across the country to weed out the duplicate and fake ones. However, the proposal could not be implemented due to parallel implementation of similar biometric based Aadhaar cards.
Now, the government has tried to plug this loophole. Being a biometric verified identification, it is not possible for any person to have multiple Aadhaar numbers and by linking Aadhaar to PAN numbers, the government is making sure that one person can hold single PAN only.
Check on loan defaulters
Apart from tax evasion, multiple PAN was also suspected to be misused by unscrupulous people to get loans from various banks and financial institutions under different PANs and then defaulting on these loans. Aadhaar verified PANs will also help in checking this malpractice.
Making Aadhaar mandatory for PAN and income tax returns is also another step in the government’s efforts towards making Aadhaar the primary identification number of an Indian resident and making it the primary tool for disbursement of any government subsidies by way of Direct Benefits Transfer or providing benefit of government welfare schemes and programmes by effective service delivery to the intended recipient and thereby promoting transparency and good governance.
Despite the good intent of the government, the timeline of July 1, 2017 is perhaps a little too early for implementation of this provision. Similarly, a question arises on whether the government has the necessary infrastructure to implement this within this short timeline and whether all genuine individuals, who do not have Aadhaar, would be able to obtain it and link it to their PAN. One can only hope for seamless implementation of this new law without much harassment to genuine persons.
The writer, Shailesh Kumar is director, direct taxation, Nangia & Co.