india

Updated: Jul 21, 2019 04:48 IST

Income-tax authorities will keep tabs on people who don’t declare any taxable income, but splurge money on acquiring cars and homes, travelling overseas, buying jewellery and investing in financial instruments, as they seek to identify tax evaders and widen the taxpayers’ base. Their main weapon: the Aadhaar unique ID.

Three recent decisions – making the permanent account number (PAN) interchangeable with Aadhaar, automatic issuance of PANs to people who provide their Aadhaar number in high-value transactions, and to make PANs that are not linked to Aadhaar inoperative from September 1 -- have armed the authorities to track tax cheats, officials said.

Some 220 million PANs have been issued by the tax department so far -- less than a fifth of the 1.23 billion Aadhaar numbers that have been provided by the Unique Identification Authority of India (UIDAI).

From now on, those who do not possess a PAN will have no option but to furnish their Aadhaar number when they make big-ticket transactions, and this will include residents of rural areas too. This will help tax detectives zero in on tax evaders who under-report their incomes, the officials with direct knowledge of the matter said on condition anonymity.

The three decisions cited above were announced in the fiscal 2019-20 budget presented by finance minister Nirmala Sitharaman on July 5. Announcing the interchangeability of PAN and Aadhaar, she said: “Therefore, for ease and convenience of tax payers, 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”.

In order to track high-value transactions, the budget also made quoting and authenticating PAN/Aadhaar mandatory for some transactions, the list of which can be expanded by the Central Board of Direct Taxes (CBDT).

Currently, individuals are required to provide the Aadhaar number for opening a bank account, making an application for a credit or debit card, opening a demat account, and for paying hotel and restaurant bills that amount to more than Rs 50,000, and selling or purchasing goods or services exceeding Rs 2 lakh per transaction.

It will eventually be mandatory for all PAN holders to get their PAN linked with Aadhaar so that they cannot bypass tax authorities by performing high-value transaction using only their unique ID numbers, the officials cited above said. PANs that are not t linked with Aadhaar will be declared invalid, the officials said. To be sure, the income-tax department will not act retrospectively.

These provisions are expected to be applicable from September 1, 2019 after necessary amendments are made to existing laws and the subsequent issuance of a notification to that effect, the officials said.

The government’s move to link PAN with Aadhaar and make PAN and Aadhaar interchangeable shows the government’s focus on making Aadhaar the basis for tracking financial transactions, said Kuldip Kumar, partner and leader of the personal tax practice at consulting firm PwC India, said.

“This will not only help to collect the rightful taxes by the government but will also help to track bogus/shell transactions,” he said.

By allowing people to quote their Aadhaar number in place of PAN, the department could fulfil two objectives – to bring more and more people under the tax net and to link Aadhaar with PAN, which is an essential step in the direct benefit transfer process, said Rakesh Bhargava, director of the tax research and consulting firm Taxmann.com.

“As on date more than 90% of India’s population possess an Aadhaar number. Allowing interchangeability of PAN with Aadhaar is an intelligent move which not only ensures convenience for the individual but it also ensures that the [income-tax] department gets information about the financial transactions,” he said.