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Quoting Aadhaar For Tax Return / Tax Id Mandatory

01 April 2017

As per the recently passed Finance Bill 2017, the Indian Government has made it mandatory to quote Aadhaar Number in below cases effective from July 1, 2017:

  • To apply for a Permanent Account Number (PAN) i.e. Indian Tax ID
  • To keep the existing PAN active
  • To file tax returns in India

What is Aadhaar?

Aadhaar number is a 12-digit Unique ID Number issued under Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (Aadhaar Act) by the Unique Identification Authority of India (UIDAI) to the resident individuals after due verification. Individuals who enroll would need to provide demographic and biometric information. As a part of the Aadhaar verification process the following information is to be provided:

Type of Information Details required
Demographic information Name, Date of Birth (verified) or Age (declared), Gender, Address, Mobile Number (optional) and Email ID (optional)
Biometric information 10 Fingerprints, 2 Iris Scans, and Facial Photograph

The information collected during enrollment is secure and confidential and shall be used for the intended purposes only

The Aadhaar identity platform is one of the key pillars of the ‘Digital India’, wherein every resident of the country is provided with a unique identity. The key features of Aadhaar number are as under:

  • Aadhaar identity platform with its inherent features of Uniqueness, Authentication, Financial Address, and e-KYC, enables the Government of India to directly reach residents of the country in delivery of various subsidies, benefits and services by using the resident’s Aadhaar number only.
  • Aadhaar system provides single source online identity verification across the country for the residents.
  • Unique and robust enough to eliminate duplicates and fake identities
  • Aadhaar number is a proof of identity, however, it does not confer any right of citizenship or domicile in respect of an Aadhaar number holder.

Who needs to obtain Aadhaar Number?

Aadhaar Number needs to be obtained by individuals who are “Resident” under Aadhaar Act. As per Aadhaar Act, an individual who has resided in India for a period or periods amounting in all to 182 days or more in the 12 months immediately preceding the date of application for enrolment qualifies as a “Resident” as per the said Act. Hence, quoting of Aadhaar Number or Aadhaar Enrolment ID, as the case may be, shall apply only to a “Resident” as per the said Act.

What is the relevance for an Individual Tax Payer?

  • Mandatory requirement for obtaining PAN From July 1, 2017 onwards PAN applications without quoting Aadhaar Number/ Enrolment ID may not be accepted
  • Mandatory requirement for filing Income Tax return From July 1, 2017 onwards it is mandatory to quote Aadhaar Number/ Enrolment ID in Income tax return forms. Hence an individual may look to file their tax return for Financial year 2016-17 before July 1, 2017.
  • Linking PAN and Aadhaar Individuals who have been allotted a PAN would need to mandatorily intimate the Aadhaar number to the such authority in the form and manner as specified. Failure to do so would deem the PAN as invalid and other provisions of the Income-tax Act, 1961 would be attracted as if the PAN had not been applied for.

Do expats need to obtain Aadhaar Number?

An expat, being an individual, would need to obtain an Aadhaar Number provided he is a resident under the Aadhaar Act. Given that this would create practical challenges for the expats in/outside India, there have been various representations made regarding this matter to the tax authorities. While a leeway was expected for expats for applying for an Aadhaar, a recent statement issued by the tax authorities has reconfirmed the need of Aadhaar. It is expected that Government would provide a facility of obtaining Aadhaar through its Embassy/High Commission overseas so that individuals living abroad who are eligible to obtain Aadhaar number can avail this facility, but at this juncture no announcements have been made in this regard.

How BDO India can help

In light of the above and the impending due date of July 31, 2017 to file the Indian tax return for FY 2016-17 it is imperative to understand the implications of this new development. We would be happy to assist in analysing the requirement of applying for Aadhaar number. If necessary, we could also assist with the enrolment for the Aadhaar Number and the way forward.