In the upcoming Union Budget 2023-24, the Finance Ministry is likely to propose doing away with the requirement of furnishing a Permanent Account Number (PAN) card for financial transactions backed by Aadhaar.
The move is aimed at simplifying rules as demanded by financial institutions and banks.
Some banks have asked the government to drop the requirement for PAN since most accounts are already seeded with Aadhaar.
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An official privy to the developments of the matter told Economic Times that the government had received representations in the regard, and they are being inspected.
Currently, financial transactions where PAN is not provided are subjected to a Tax Deducted at Source (TDS) of 20%, even if the applicable rate is lower, as per Section 206AA of the Income Tax Act.
Some banks want the Income Tax Act to be amended in order to avoid unnecessary duality and confusion caused due to the present system.
All bank accounts seeded with Aadhaar
Banks say that almost all individual accounts are seeded with Aadhaar numbers. They further argue that Section 139A(5E) of the Income Tax Act allows users to furnish an Aadhaar number instead of a PAN card for certain transactions.
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The official further said a potential clarification on the matter may spell a specified limit below which PAN may not be required. The report further said that the official further said that Section 206AA ensures that the TDS is applied at the correct rate and prevents tax evasion by entities or individuals who do not quote their PAN cards in certain transactions.
The clarification on the matter is likely to help those who are not required to furnish PAN but can face higher tax deductions while making some transactions.
