The Finance Ministry is likely to propose eliminating the requirement to provide a Permanent Account Number (PAN) card for Aadhaar-backed financial transactions in the forthcoming Union Budget 2023–2024.
The move aims to simplify regulations, as banks and financial institutions have requested.
Economic Times was informed by a person with knowledge of the developments that the government has received representations in this regard and is examining them.
According to Section 206AA of the Income Tax Act, financial transactions for which a PAN is not provided are currently subject to a Tax Deducted at Source (TDS) of 20%, even if the applicable rate is lower.
A few banks need the Income TaxAct to be revised to stay away from pointless duality and turmoil caused because of the current framework.
Almost all individual bank accounts are said to be seeded with Aadhaar numbers, according to the banks. They also say that for some transactions, users can use an Aadhaar number instead of a PAN card under Section 139A(5E) of the Income Tax Act.
In addition, the official stated that a possible clarification on the subject may specify a limit below which PAN may not be required. According to the report, the official also stated that Section 206AA prevents tax evasion by entities or individuals who do not quote their PAN cards in certain transactions and ensures that the TDS is applied at the correct rate.
Those who are not required to provide a PAN but may be eligible for higher tax deductions when making certain transactions will likely benefit from the clarification.
