The Finance Ministry is anticipated to propose eliminating the need to present a Permanent Account Number (PAN) card for financial transactions supported by Aadhaar in the upcoming Union Budget 2023–24. The action aims to streamline regulations in response to banks' and financial organisations' requests. However, this will be done only for a few financial transactions.
This suggestion has been made to the government by banks. According to banks, PAN is not required because the accounts are connected to Aadhaar. An official with knowledge of the situation said that information in this respect had been received, was being looked at, and could be taken into account during the budget.
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Financial transactions without a PAN are currently subject to 20% Tax Deducted at Source (TDS), even if the applicable rate is lower, per Section 206AA of the Income Tax Act.
Some banks want the Income Tax Act to be changed in order to eliminate the confusion and needless duplication that the current system causes.
Regarding the transfer of funds from the bank, numerous issues surfaced. The PAN card was introduced to curb fraud and tax evasion. PAN cards are necessary for transactions over a certain amount.
Aadhaar numbers, according to banks, are nearly always pre-populated into individual accounts. They further mention that under Section 139A(5E) of the Income Tax Act, clients may opt to use their Aadhaar number in place of their PAN card for certain transactions.
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The official added that a future clarification on the topic might provide a lower threshold below which PAN might not be necessary.
The official further stated, according to the newspaper, that Section 206AA prevents tax avoidance by entities or people who fail to provide their PAN cards in specific transactions and guarantees that the TDS is applied at the correct rate.
According to experts, taxpayers will benefit if the government decides to use PAN cards in this way. Some transactions, though, can qualify for greater tax deductions. New bank account holders and those whose income is below the taxation threshold will additionally profit from this. A PAN card must be presented by anyone who conducts more than 20 lakh transactions in a calendar year.
