Aadhaar card made mandatory for filing I-T return, applying for PAN card and more: What does it mean

The government on Tuesday proposed to make Aadhaar Card mandatory for filing income tax returns and also applying for a Permanent Account Number (PAN).

The proposal was made through an amendment to the Finance Bill 2017 moved by Finance Minister Arun Jaitley in the Lok Sabha. The decisions were part of amendments moved to the finance bill, which puts into effect the Budget proposals.  

The finance bill carries an unprecedented 40 amendments, according to PTI, and will also impact other laws such as RBI act and representation of people act. 

Besides being mandatory for filing an income tax return, any application for an income tax PAN will also have to state the applicant's Aadhaar or 12-digit unique ID which is backed by biometrics like finger prints and iris scans.

The amendment provides that a person holding PAN as on July 1, 2017, has to intimate his Aadhaar number to authority in a manner which will be notified by the government.

"Provided that in case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be deemed to be invalid...," the amendments said. An amendment to the Companies Act of 2013 made donations by companies to electoral trusts only through account payee cheque, bank draft or electronic transfer.

Rationale behind proposal

The government has made this proposal on the pretext that Aadhaar-based e-KYC facility would allow individuals or entities wanting to apply for PAN to verify details such as date of birth or address by way of biometric identification using thumb impressions. 

The amendments also make Aadhaar must for tax returns and PAN applications beginning July 1. Aadhaar enrolment number while filing ITR could also be accepted. Failing to declare Aadhaar may lead to PAN being deemed invalid.

The government decided on Tuesday to lower the limit on cash transaction from Rs 3 lakh to Rs 2 lakh.

Limit on cash transactions

The limit on cash transactions is in line with recommendations of the Special Investigation Team (SIT) on black money.

In addition to this limit, the Income Tax Act prohibits making or accepting payment of an advance of Rs 20,000 or more in cash for purchase of immovable property. PAN is also mandatory for any purchase of above Rs 1 lakh.

The Government has come out with a series of initiatives to streamline the process of filing income tax online and putting more people in the garb of paying their taxes. 

Benefits under Pradhan Mantri Kaushal Vikas Yojana to be availed quote Aadhaar number

Centre made it mandatory for beneficiaries to quote their Aadhaar number to avail themselves of benefits under the Pradhan Mantri Kaushal Vikas Yojana for skill development, and the Self Employment Scheme for Rehabilitation of Manual Scavengers.

The Centre had identified 31 schemes in which the Aadhaar could be made mandatory. Notifications have been issued in recent months by departments to make Aadhaar compulsory for getting subsidised grains under the National Food Security Act, jobs under the MGNREGA and pension benefits under the Employees’ Pension Scheme.

Mobile Application for tax filing and tracking of returns

The I-T department had announced a mobile app for paying taxes and tracking of refunds. It had also said it was considering issuing PANs on real time basis using Aadhaar biometric.

"Income Tax department is considering issuing of Permanent Account Number (PAN) on a real time basis using Aadhaar's e-KYC facility. The proposal is at an initial stage of consideration," Minister of State for Finance Santosh Kumar Gangwar had said in a written reply in Lok Sabha on March 10.

He said if a substantial portion of bill deals with imposition or abolition of tax, then even if it has other incidental provisions, it can still be introduced as a Money Bill.

Companies disclosure in Profit Loss Statement on contribution to trusts

This amendment also tweaked the language to provide for every company disclosing in its profit and loss account the total amount contributed to such trusts. The move is in sync with Jaitley's Budget proposal of introducing bearer electoral bonds, which could be purchased by a donor using cheques from a scheduled bank and encashed only through a notified bank account of a political party within the limited duration of such instrument.

These moves together are aimed at "cleansing political money", he said. Earlier, Speaker Sumitra Mahajan overruled Opposition objections, saying rules permit "non-taxation proposals" to be included in the Finance Bill.