Your PAN Card is accepted as a valid ID proof all over India, but it is also used to track transactions. Apart from filing taxes, your PAN Card is also critical when making high-value transactions that exceed a certain threshold like purchasing shares, mutual funds, or motor vehicles. Your biometrically verified Aadhaar Card, on the other hand, is an essential identity proof document, used for almost everything – be it getting an LPG connection or claiming pension benefits. In fact, Aadhaar is now required even while submitting your ITR. Given the importance of these two documents, the Indian government has mandated their linkage. According to the government directives, taxpayers had to link their PAN and Aadhaar numbers by 31st June 2023.
While at first glance, it may seem like this policy is simply a legal requirement, it is actually much more than just that. Linking PAN and Aadhaar offers an array of benefits to both you, the taxpayer, and the Indian government. This article discusses these benefits in detail below.
Benefits of PAN-Aadhaar linking
PAN and Aadhaar linking in beneficial in the following ways:
Simplified tax filing
The ease of filing tax returns is one of the primary benefits of the PAN-Aadhaar linkage. Once your PAN and Aadhaar is linked, validating the submitted ITR will become easy through the Aadhaar OTP verification mode. The Aadhaar verification system will also help save the taxpayer time and effort when filing taxes.
Audit trail to end fraud
Your PAN number needs to be disclosed for all transactions that exceed a certain threshold. For instance, if you make a high-value purchase of jewellery worth Rs. 2 Lakhs or more through an online marketplace or offline store, you must disclose your PAN details. However, transactions of lower value are not tracked through PAN but Aadhaar which has become a virtually essential document in almost all transactions. Linking your PAN and Aadhaar creates an audit trail for the IT Department making the act of tracking transactions easier and more effective.
Spotting multiple PAN Cards
Linking your PAN and Aadhaar also helps the IT Department track tax evaders. Holding multiple PAN Cards is one of the primary techniques of dodging taxes. Individuals with multiple PANs simplify distributed income among the fraudulent PAN Cards to evade tax payment obligations. However, since Aadhaar has a biometric basis, the PAN-Aadhaar linking strategy will make it difficult to create multiple PAN Cards for the same individual. Thanks to this linking, the government will now be able to identify multiple PAN Cards registered under the same name and take appropriate actions.
Streamlined approach to identification
Linking your PAN and Aadhaar Cards ensures a streamlined approach to identification by integrating two key government-issued IDs in a unified database. It unifies the financial identity of the person, making it easier to manage transactions. Additionally, it also simplifies KYC processes for banks, NBFCs, and other financial institutions since they can simply use Aadhaar verification to validate your identity and PAN details.
Simplified financial tracking
From the Indian government’s perspective, linking PAN and Aadhaar will help tax authorities better monitor a taxpayer’s financial action. This, in turn, will promote better openness in the taxation system, ease the process of detecting tax evasion, and help monitor high-value transactions.
Compliance with regulatory norms
Completing the PAN-Aadhaar linking process is also critical to ensure compliance with the revised regulatory norms. According to the IT Department, failing to link your PAN and Aadhaar will result in your PAN Card becoming inoperative. Moreover, unless your PAN is linked to your Aadhaar, you will not be able to submit returns on the e-filing portal. Linking your PAN and Aadhaar post the deadline will also attract a penalty of Rs. 1,000. Linking your PAN and Aadhaar will ensure compliance with tax regulations.
Conclusion
The PAN-Aadhaar linkage extends various benefits to both taxpayers and the Indian government. As a taxpayer, you can keep your PAN Card operative, ensure compliance, enjoy simpler ITR filing perks, and unified identification benefits by linking your PAN and Aadhaar. On the other hand, the India government can also tap into the benefits of easier audit trail tracking, fewer instances of tax evasion, and a broader tax base for better revenue. However, to tap into the various benefits of this policy, you must link your PAN and Aadhaar at the earliest. You can do so on the e-filing portal after paying the delayed linking fee online.
