Aadhaar card is an official document issued by the Ministry of Electronics and Information Technology, MeitY. The Ministry has authorized Unique Identification Authority of India, UIDAI, to issue the Aadhaar card. Aadhaar card is issued after clicking the photograph and capturing the biometrics of the applicants. Aadhaar database is the largest biometric system in the World.
Aadhaar card serves as a valid document for age proof, address proof and identity proof. Possessing Aadhaar card facilitates the hassle free process of obtaining the Passport. The most important use of Aadhaar is it enables direct transfer of Government benefits to the beneficiary’s bank account, thereby reducing corruption to a large extent.
Permanent Account Number, PAN, is a ten digit alphanumeric number issued by the Income Tax Department under the supervision of the Central Board of Direct Taxes or CBDT. All financial transactions would be linked to the PAN card.
The Income Tax Department has made it mandatory for all taxpayers to link PAN with Aadhaar, without which ITR cannot be filed. The Income Tax Department has stated that all taxpayers must link PAN with Aadhaar, the deadline for the same was 30th June 2018. It was later extended to 31st March 2019.
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SEE ALSO: What Is Aadhaar Card
1. Starting a Business: PAN has been made mandatory for all companies by the Indian Government through the Income Tax Act, enacted in 1961 and was implemented in 2010. All companies must provide their TRN (Tax Registration Number) to whoever is making the payment. A TRN is obtained only if you have a PAN.
2. Claiming Refunds from Income Tax (IT) Department: You must file Income Tax Returns each year. The ITR is used for many reasons like checking your credibility for a bank loan. You are eligible for a refund if TDS is higher than the actual tax payable. To receive the refund, your PAN must be linked with your savings bank account.
3. Buying a Car: Possessing PAN card is mandatory to buy and sell a four wheeler in India. It is mandatory to possess PAN if you intend to avail a loan to buy a car. PAN card is not mandatory if you are buying a used car. You can fill Form 60 if you don’t have PAN.
4. Opening a Bank/ Demat Account: As per the current rules, you are not allowed to open bank and demat accounts without having PAN. If you want to invest in mutual funds and stock market, then you must possess PAN.
5. Purchasing Foreign Currency: As per the Foreign Exchange Management Act, possession of PAN is must to buy foreign currency in excess of Rs 50,000. This is because all transactions involving foreign currency are sorted under the capital or current account transactions.
6. Transaction of Securities (Listed or Unlisted): According to the Securities Contracts (Regulation) Act, enacted in 1956, purchasing of any security (listed or unlisted) other than shares, bonds, debentures and other marketable securities, requires buyers to mandatorily possess PAN card. Sale or purchase of shares of unlisted companies over the value of Rs 1 Lakh also mandates possession of PAN card.
7. Bank Drafts, Pay Orders, Bankers Cheques, and Cash Deposits: While it is mandatory to produce PAN to open a new bank account, it is also mandatory to produce PAN at the time of making bank drafts, pay orders, cash deposits worth more than Rs 50,000. This is applicable even when you are transacting on your own account.
8. Sale or Purchase of Immovable Property: It has been made mandatory to furnish PAN details at the time of buying and selling properties that are worth more than Rs 10 Lakhs.
SEE ALSO: Why Is PAN Important?
You must follow the below mentioned steps to link PAN with Aadhaar:
Sushil Chandra, the chairman of Central Board of Direct Taxes, CBDT, said they are considering canceling those PAN cards that are not linked with Aadhaar by 31st March 2019. The move of linking Aadhaar with PAN is expected to curb duplicate PANs.
Linking of PAN with Aadhaar is expected to expose tax frauds, as per the chairman of CBDT. Linking of PAN and Aadhaar facilitates hassle free government transfer of benefits to the eligible individuals.
However, Aadhaar linking is not mandatory with bank accounts and phone numbers as per the Supreme Court’s order in September 2018.
Individuals cannot file income tax returns without linking Aadhaar with PAN. Not filing income tax returns within the deadline attracts penalties of up to Rs 10,000.
The following consequences may be faced by individuals who don’t pay tax on time:
1) Penalty: A three-tier fee system was introduced for not filing income tax returns within the due date. If the ITR is filed post the due date but before December 31st, then the applicable penalty would be Rs 5,000 while in other cases, it would cost Rs 10,000.
However, in case of taxpayers, whose total income is less than Rs 5,00,000 a year, then the fees applicable shall be less than Rs 1,000.
2) Reduced Time for Updating your Income Tax Returns: Consider you are filing ITR and you make a mistake. As per the ITR rules, you have time only till March 31st 2019 to make changes for ITR for FY 2017-18. Whereas, taxpayers had a 2 year window to update and resubmit an erroneous ITR, which has now been reduced to just one year from the end of the financial year. Hence, earlier you file ITR, the longer would be the window to update and resubmit.
3) Interest to be Paid on Tax Amount: If the income tax return is not filed within the due date, then an interest rate of 1% per month or part of the month is collected up to the date of filing the ITR. The interest is applicable on tax after deducting the TDS, TCS, advance tax and all other tax deductions under the Income Tax law.
4) No Carry Forward of Losses: If income tax return is not filed within the due date, then the taxpayer is not allowed to carry forward any loss under the head "profits and gains of business or profession" or "capital gains". However, unabsorbed depreciation and loss under the head "income from house property" are allowed to be carried forward.
5) Delay in Processing of Return of Income: If the return is filed and verification of the same is duly completed, then the IT officials at Central Processing Centre, Bangalore, of the Income Tax Department would process the income tax return. It is only then the tax liability or refund of taxpayer is determined. If the taxpayer is claiming a refund, then delayed filing of income tax return would result in a delayed receipt of the tax refund.
Therefore, it is advisable for every taxpayer to file income tax return (ITR), well before the due date and avoid the above mentioned consequences including levy of mandatory fees.
After Section 139A under the Income Tax Act, the following section will be inserted:
Section 139AA: Quoting Aadhaar number. (1) Each person who is eligible to obtain Aadhaar shall, on or after the 1st of July 2017, quote his or her Aadhaar number:
(i) In the application form for obtaining permanent account number;
(ii) In the income tax return:
If the person does not possess Aadhaar Number, then the enrolment ID of Aadhaar application issued at the time of enrolment must be quoted in the application form for PAN or, as the case may be, in the return of income furnished by him or her.
(2) Each person who has been allotted permanent account number as on the 1st of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to such authority in such form and manner as may be prescribed, on or before a date to be notified by the Central Government in the Official Gazette:
In case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be cancelled and the other provisions of this Act shall apply, as if the person had not applied for allotment of permanent account number.
(3) The provisions of this section do not apply to such a person or class or classes of persons or any State or part of any State, as may be notified by the Central Government in this behalf, in the Official Gazette.
Explanation.—For the purposes of this section, the expressions—
(i) "Aadhaar number", "Enrolment" and "resident" shall have the same meanings respectively assigned to them in clauses (a), (m) and (v) of Section 2 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 (18 of 2016);
(ii) "Enrolment ID" is a 28 digit Enrolment Identification Number issued to the applicants at the time of enrolment.
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