New Rules for Aadhaar in PAN Applications and Income Tax Returns : Budget 2024

In the Union Budget 2024, presented on July 23, 2024, a significant change was announced regarding the use of Aadhaar Enrolment ID in place of Aadhaar numbers. This move aims to streamline and simplify the process of linking Aadhaar with the Permanent Account Number (PAN) and filing income tax returns, addressing issues of duplication and misuse. Here are the details of this change and its implications.

Existing Provisions Under Section 139AA

The current provisions under section 139AA of the Income-tax Act mandate the following for individuals eligible to obtain an Aadhaar number:

1. PAN Application: Every person must quote their Aadhaar number in the application form for the allotment of a PAN.
2. Income Tax Return: Every person must quote their Aadhaar number in their return of income.

For those who do not possess an Aadhaar number, the section allowed quoting the Aadhaar Enrolment ID (EID) from the Aadhaar application form in the PAN application or income tax return.

Reason for Change

The provision allowing the quoting of Aadhaar Enrolment ID was introduced in 2017 to accommodate individuals who had applied for Aadhaar but had not yet received their Aadhaar number. However, since 2017, Aadhaar coverage has expanded significantly, now encompassing the majority of the Indian population. Given this widespread coverage, the option to use the Enrolment ID has become redundant and poses risks of duplication and misuse of PAN.

Proposed Amendments

1. Discontinuation of Aadhaar Enrolment ID Quoting:
   • From October 1, 2024, the proviso to sub-section (1) of section 139AA, which allowed the quoting of Aadhaar Enrolment ID, will no longer apply.
   • Individuals will now be required to quote their actual Aadhaar number in the PAN application and income tax returns.
2. Intimation of Aadhaar Number:
   • Individuals who were allotted a PAN based on their Aadhaar Enrolment ID must intimate their Aadhaar number to the tax authorities on or before a notified date.
   • This ensures all PAN records are updated with the correct Aadhaar numbers, eliminating potential discrepancies and misuse.

Effective Date

These amendments will take effect from October 1, 2024. This transition period provides individuals ample time to update their records and ensure compliance with the new requirements.

Implications for Taxpayers

1. Simplification and Clarity:
   • By discontinuing the use of Aadhaar Enrolment ID, the process of linking Aadhaar with PAN becomes more straightforward.
   • Taxpayers will no longer face the confusion of whether to use their Aadhaar number or Enrolment ID.
2. Enhanced Accuracy:
   • Updating PAN records with actual Aadhaar numbers enhances the accuracy of taxpayer databases.
   • This move helps in reducing the chances of identity duplication and potential misuse of PAN.
3. Compliance Requirements:
   • Taxpayers who have been using the Aadhaar Enrolment ID must ensure they update their records with their actual Aadhaar number before the specified deadline.
   • Non-compliance could lead to issues in PAN validation and filing of income tax returns.

The discontinuation of the Aadhaar Enrolment ID provisions marks a significant step towards rationalising the use of Aadhaar in the tax administration system. By ensuring that all PAN records are accurately linked to Aadhaar numbers, the government aims to enhance the integrity and efficiency of the tax system. Taxpayers are encouraged to promptly update their Aadhaar details to comply with the new regulations effective from October 1, 2024.

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