The simple act of paying your income tax to the government — an article of citizens’ faith that is not exercised by enough Indians with incomes over Rs. 2.5 lakh a year if you go by India’s low direct tax base — will never be the same again. Having a PAN (permanent account number) card from the Income Tax department will no longer be enough to file your returns. Starting July 1, the government has made it mandatory for taxpayers to link their Aadhaar number to their PAN cards in order to be able to file returns. Aadhaar numbers have also been made mandatory for all those applying for a new PAN card after July 1.
Among several changes appended to this year’s Finance Bill that did not figure in the budget speech, Finance Minister Arun Jaitley introduced a new Section, 139 AA, in the Income Tax Act of 1961. This new Section stipulates that all PAN cardholders share their Aadhar number with the tax authorities so that the two documents can be linked, and makes quoting of Aadhaar mandatory for all PAN card applications and to file income tax returns. Parliament approved the Bill in April, including the provision that Mr. Jaitley stressed was a measure to check tax evasion by those having multiple PAN cards. The new provision also states that the existing PAN cardholders who fail to link their Aadhaar numbers will have the legal status of their PAN card revoked and those cards will be held invalid for all other purposes. However, petitions were filed in the Supreme Court, challenging the move with the argument that it runs foul of the court’s earlier decision on Aadhaar-related petitions that the unique ID number cannot be made mandatory. The Supreme Court ruled on June 9 that the new provision does not violate the Constitution or its earlier order passed in 2013. For those holding Aadhaar numbers, the court said the provision would apply in totality but held that PAN cards of those who do not have Aadhaar number cannot be held as invalid “for the time being.”
PAN cards are mandatory not just for filing income tax returns, but also for deposits above Rs. 50,000 into bank accounts as well as purchasing property, among other things. The universe of taxpayers in India is smaller than the number of PAN cardholders. Aadhaar was introduced as a unique identification system that would pay off the government’s investment in capturing people’s biometric information by plugging leaks and benefit-cheating in welfare programmes for the poor through real-time authentication of the beneficiary’s identity. Most taxpayers, barring those earning up to Rs. 10 lakh a year who still get cheaper LPG cylinders, are not eligible for subsidies. Effectively, the Centre has managed to expand the ambit of Aadhaar beyond subsidy beneficiaries, thus making it a more universal identification system.
If you don’t have an Aadhaar number yet, you could either fast-track your income tax returns and submit them before July 1 or enrol yourself for Aadhaar. For now, the government has said that even an Aadhaar enrolment number will suffice in order to file returns or apply for a PAN card. Those who already have an Aadhaar number must ensure they quote it in their returns as tax experts warn that any attempt to conceal the same would be tantamount to providing false information and invite prosecution under the income tax law, with punishment that could include imprisonment and fines. The Supreme Court may have offered limited relief to taxpayers, but the bigger battle over the Aadhaar programme will continue in its corridors as and when a Constitutional Bench is formed to examine Aadhaar-related concerns about right to privacy and human dignity as limbs of Article 21 of the Constitution.
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