Finance Minister Nirmala Sitharaman, while presenting the Budget in Parliament on July 5, said more than 120 crore citizens of the country now have Aadhaar. "Therefore, for ease and convenience of taxpayers, I propose to make PAN and Aadhaar interchangeable," she said.

The Finance Minister said that individuals not having PAN will be allowed to file income tax returns "by simply quoting their Aadhaar number". The assessees will also be able to quote Aadhaar wherever they are required to furnish PAN.

This means that the taxpayer will have the option to furnish Aadhaar under the Income Tax Act wherever quoting of the PAN is required.

The Income Tax Department will allot PAN to such individuals - who do not have a PAN and choose to quote Aadhaar instead. In other words, the taxman will obtain demographic data from the UIDAI to issue a PAN to such individuals.

Additionally, individuals with their Aadhaar linked to their PAN will also get the option of using Aadhaar in place of PAN under the I-T Act.

Tax experts say that such interchangeability may not mean that PAN is no longer required.

"If Aadhaar furnished by a person who already has a PAN it will be linked to PAN. For people who don't have a PAN, based on Aadhaar, their PAN will be issued as soon as possible and sent to him/her," said Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP.

"This will be interesting for high value transactions where PAN has to be quoted. It will expand tax base," he added.

In the first budget of the re-elected National Democratic Alliance (NDA) government, the Finance Minister also proposed quoting of PAN or Aadhaar on a mandatory basis for high value transactions.