Blog Details

Author - Associate Sanjani Shah

In the Union Budget 2019, Finance Minister Nirmala Sitharaman had announced in her Budget speech that Pan Cards and Aadhar Cards be interchangeable for filing Tax returns. Now, taxpayers can file Income Tax returns without having a PAN card. They can fill Income Tax returns with their Aadhar Card number as well.

In Budget 2019 speech, Finance Minister Nirmala Sitharaman had said “More than 120 crore Indians now have Aadhar card, therefore for ease of taxpayers I propose to make PAN and Aadhar interchangeable and allow those who do not have PAN to file returns by simply quoting Aadhar number and use it wherever they require to use PAN”.

Currently, taxpayers need to have both Aadhar card and PAN card to file income tax returns, but now taxpayers need either Aadhar card or PAN card to file income tax returns (ITR).

The Supreme Court of India had given the verdict in the end of September in the case of Justice Puttaswamy (Retd.) Vs. Union of India, endorse the overall validity of the Aadhar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.

The Aadhar Act was associated to be constitutional to the level it permits for Aadhar number- based authentication for establishing the identicalness of an individual for obtaining of subsidy, benefit or service given by the Central or State Government-funded from the Consolidated Fund of India.

The Supreme Court has refused the use of independent Aadhar numbers by any private organization for setting up the identity of the independent concerned for any motive agreeable to contract, on the basis of clashing to the fundamental right to privacy. The Supreme Court also presides over a number of laws, circulars, and directions, which require the obligatory linking of an Aadhar for obtaining pertinent services.

This alert examines the procedures adopted by the Supreme Court, indicatively in relation to the right to privacy of an independent. Further, it discusses the directives passed regarding current requirements for the obligatory linking of Aadhaar numbers. Eventually, the alerts examine the data protection fundamentals recognized by the Supreme Court in this judgment, taking into account the Personal Data Protection Bill, 2018. The Income tax Department shall issue PAN to aforesaid on the basis of Aadhar after acquiring demographic data from the Unique Identification Authority of India (UIDAI).

According to the proposed rules, if a taxpayer has already linked their Aadhar with their PAN card, then they can have the choice to use either of card numbers to file Income Tax Returns.

For high-value transactions, the Finance Minister has made it compulsory to provide the quoting and validity of PAN / Aadhar for certain stipulate transactions.  The budget also initiates a provision where the person receiving applicable documents shall make certain corrections quoting and validating the PAN and Aadhar for the stipulate transactions. To make certain compliance of these provisions, it is suggested to amend the penalty provisions.

Currently, for making PAN card if it is not linked with Aadhar card within a defined date then, as per the Income Tax Act, it is invalid. However, the Finance Minister has now taken a step to protect past transactions. It has been put forward in the budget that if a person fails to provide the Aadhar number then the allotted PAN to such person shall be unserviceable.

For cash transactions of more than Rs.50,000 and all other occasions where authentically income tax PAN card was must, Aadhar card can be used. To accept Aadhar in all places where the use of PAN is compulsory including the bank will have to make necessary backend upgrades.

To conduct financial transactions, as of mutual fund investments, buying gold and other precious metals individual will be able to use Aadhar cards if this proposal had been passed in the parliaments. To ease and improve the process of tax payment for taxpayers and this move is aimed at upgrading tax compliance.

The Supreme Court adhered that the right to privacy cannot be having an effect without an equitable, just, fair and reasonable law. This needs extant of law, which works for legalized state aim and is proportionate to the objective attempt to be achieved. 

The Supreme Court further simplified that the proportionality test includes the following feature:

1. Legitimate goal
2. Rational connection
3. Necessity
4. Balancing

Certain part or portion of Aadhar Act, been cut or read down by the Supreme Court as it did not satisfy the above proportionality test. However, deviations from these provisions, the Supreme Court adhered that the Aadhar Act, on the whole, as a law which works for lawful state aim and is proportionate, thereby being a sensible exception to the right to privacy.