india

Updated: Jul 14, 2019 07:46 IST

The option of quoting your Aadhaar unique identity number, in place of the permanent account number (PAN), in performing high-value transactions — buying a car or home, travelling overseas or making investments — will come with a flip side. You will be liable to pay a penalty of Rs 10,000 every time you provide the wrong number.

The penal provision is expected to be applicable from September 1, 2019 after amendments are made to the relevant laws and the subsequent issuance of a notification, two government officials aware of the development said, requesting anonymity.

Any individual who fails to quote his or her identification number accurately in the documents related to high-value transactions may attract a fine of Rs 10,000 for each such violation and a similar penalty will be imposed on the person who is supposed to authenticate the identification number, one of the official said. “It is also proposed that before passing a penalty order, a person shall be heard,” the official added.

The second official said the existing laws will be amended in lines with the July 5 budget announcement that allowed the interchangeability of PAN and Aadhaar.

Finance minister Nirmala Sitharaman said in her fiscal 2019-20 budget speech that more than 1.2 billion Indians now possess the Aadhaar unique ID number. In comparison, only 220 million have PAN.

“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,” Siitharaman said.

Individuals can provide the Aadhaar number for opening a bank account, making an application for a credit or debit card, opening a demat account, 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.

According to experts, Section 272B of the Income Tax Act provides for penal provisions on violations related to use of PAN. The government is seeking legal amendments so that the penal provision can also be extended to Aadhaar.

The proposed amendment will make the penalty clause unambiguous and stringent by specifically emphasising that each violation would attract a fine of Rs 10,000. The existing law is vague and allows the discretion of assessment officers.

“Proposal to link PAN with Aadhaar and making Aadhaar interchangeable where one is not having PAN is a welcome move and shows the government’s focus on making Aadhaar the basis for tracking financial transactions,” said Kuldip Kumar, partner and leader, personal tax, at consulting firm PwC India. “This will not only help to collect the rightful taxes by the government but will also help to track bogus/shell transactions.”

The penalty of Rs 10,000 for every violation will act as a deterrent to misquoting the Aadhaar number in performing financial transactions, he added.

He said, “Amending Section 272B for levy penalty on the recipient of documents will help to improve compliance of quoting of PAN/ Aadhaar by those who are required to quote the same. Further, the clarification on levy of penalty for each default where PAN or Aadhaar is not quoted will also work as a deterrent as each default exposes the person to a penalty of Rs 10,000.”

The tax department proposes to allot a fresh PAN to individuals who files tax returns with only Aadhaar as part of a new arrangement to link the two databases, Central Board of Direct Taxes (CBDT) chairman Pramod Chandra Mody has said.

“When {the tax} department allots PAN on the basis of Aadhaar, it is possible that these two documents would be linked from day one. Thus, by allowing quoting of Aadhaar in place of PAN, the department could fulfil two objectives – to bring more and more persons within the ambit of tax and to link Aadhaar with PAN, which is a necessary step in DBT [direct benefit transfer] process,”said Rakesh Bhargava, director of Taxmann.com, a research and consulting firm.