Budget 2019 Income Tax: PAN and AADHAAR Interchangeable For Income-tax Purpose

  • Blog|Income Tax|
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  • By Taxmann
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  • Last Updated on 31 October, 2022

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Section 139A of the Income-tax Act, 1961, prescribes various conditions under which an assessee is required to obtain PAN. He needs to mention his PAN in all communications with the Income-tax Dept. and in specified financial transactions which exceed the threshold limit.
 
However, there can be situations where a person entering into high-value transactions, such as purchase of foreign currency or huge withdrawal from the banks, does not possess a PAN. 
 
Thus, the Finance (No.2) Act, 2019, has prescribed the following relaxations from mandatory quoting of PAN:
 
i) A person who has not been allotted a PAN but possesses Aadhaar number may furnish or intimate or quote his Aadhaar and PAN shall be allotted to such person in prescribed manner.
ii) Every person who has been allotted a PAN, and who has linked his Aadhaar number with PAN as per section 139AA, may furnish his Aadhaar number in lieu of a PAN for all the transactions where quoting of PAN is mandatory as per Income-tax Act.
Consequential amendments and insertions have been made in the penal provisions of section 272B so as to levy a penalty of Rs. 10,000 for each default in the following cases:
i) If assessee fails to quote or intimate his PAN or Aadhaar or quotes or intimates invalid PAN or Aadhaar.
ii) If assessee fails to quote or authenticate his PAN or Aadhaar in specified transactions.
iii) If receiver (i.e., banks, financial institution, etc.) of documents in respect of specified transactions fails to ensure that the PAN or Aadhaar are duly quoted and authenticated. The amendment shall be applicable from September 1, 2019.
PAN will be inoperative if not linked with Aadhaar:
i) Position up to August 31, 2019: As per existing proviso to section 139AA(2), PAN allotted to a person shall be deemed to be invalid if he fails to intimate his Aadhaar to the Dept., on or before the notified date. As a result, the PAN shall be deemed to be invalid even in all those financial transactions, or Income-tax return, which have been done or filed, as the case may be, before the date in which PAN is deemed to be invalid.
ii) Position from September 1, 2019: In order to protect the validity of transactions carried out previously through such PAN, the Finance (No.2) Act, 2019, has amended the said proviso to provide that if a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative (without declaring it invalid) in the prescribed manner.

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