CBDT chief warns of cancellation.

With less than two months to go for the deadline to link Permanent Account Number (PAN) and Aadhaar, only a little more than half of PAN holders have linked them, Central Board of Direct Taxes Chairman Sushil Chandra said here on Wednesday.

Mr. Chandra was speaking at an Assocham event.

Only 23 crore of the total 42 crore PAN holders have linked them, he said.

According to him the government could even cancel the PAN cards that were not Aadhaar-linked after the deadline of March 31, 2019. “By linking with Aadhaar, we will know whether there are any duplicate PANs or not,” Mr. Chandra said, while speaking at an Assocham event. “If it is not linked, we may cancel the PAN also.”

Mr Chandra’s statements come just days after the Supreme Court ruled that the linking of PAN with Aadhaar would be mandatory to file income tax returns from April 1, 2019 onwards.

According to Section 139AA of the Income Tax Act, inserted in 2017, not only is PAN mandatory for filing income tax returns but it is also mandatory for applying for a PAN card, which means that going ahead, all new PAN cards issued will automatically be linked to Aadhaar. The Section also says that “in case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be deemed to be invalid”.

Tax analysts say that the number of PAN card holders far exceeds the number of people filing income tax returns, but add that the linking of the two IDs was mandatory for even those who do not need to file returns since the PAN would be cancelled otherwise.

According to Finance Minister Piyush Goyal in his Interim Budget speech, the number of income tax returns filed stands at 6.85 crore, which works out to just about 16% of the total number of PANs allotted.

“There are number of people who were simply waiting for clarity on the issue before they linked PAN with Aadhaar,” Kuldip Kumar, Partner and Leader, Personal Tax, at PwC India explained. “There are many people who have a PAN but are not required to file tax returns, such as those below the taxable threshold. Then there are also a number of transactions that require PAN to be furnished, but the people conducting them might not necessarily be filing income tax returns.”

Other tax analysts also point out that senior citizens, whose incomes fall below the Rs 2.5 lakh a year, also likely have PAN cards that are not linked to Aadhaar, which they will have to now link.

“Among the 42 crore PAN holders, there are a number of companies also included who are allotted PAN,” Samir Kanabar, Partner at EY India said. “How they will link Aadhaar is also a matter than requires clarity.”

One major problem arising out of the mandatory linking of the two IDs is that many people, notably in South India, are unable to do so due to a name mismatch. Many people have abbreviations in their names in Aadhaar, which allows them, whereas the PAN does not allow abbreviations.

“From what I understand, the names have to match and only then can the two be linked,” Mr Kanabar added. “They will have to find some solution to this. They could possibly allow name mismatches, but then ensure that the other details such as date of birth, address, etc, are matching so that there is no erroneous linkage of PAN and Aadhaar.”

So far, however, the government has not acknowledged or sought to address the issue.