Banks have approached the government and said that since the accounts are linked with Aadhaar, there is no need for PAN either. “We have received representations in this regard and they are being examined,” said an official with knowledge of the matter.
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At present, if PAN is not provided, 20% is levied on the transaction subject to tax deduction at source as per section 206AA. income tax actEven if the applicable rate is lower.
The official said some lenders have suggested amendments to the Income Tax Act, as the current conflict is creating unnecessary complications in conducting banking business.
Lenders have pointed out that almost all bank accounts are already linked with Aadhaar number in case of individuals, and under section 139A(5E) of the Income Tax Act, it is permissible to quote Aadhaar instead of PAN for certain specified transactions .
“The clarification may come in the form of a certain prescribed limit and transactions below that limit may not require PAN,” the official said.
He said that the purpose of section 206AA is to ensure that TDS Applicable at the correct rate and to prevent tax evasion by individuals or entities who do not have PAN or who do not quote their PAN in specified transactions.
Experts said a clarification would benefit individual taxpayers who are otherwise not required to obtain PAN but may face higher tax deductions while making certain transactions.
These include new bank account holders and people with income below the taxable limit.
“A person whose income is below the taxable limit, such as a housewife or a pensioner, and if she has not obtained PAN, is faced with this problem and, in some cases, a higher rate of tax deduction, depending on the nature of the transaction,” said Vikas Vasal, national managing partner of tax at Grant Thornton India LLP.
A bank official said that since Aadhaar is also used as an ‘address proof’, it has wide acceptance and any clarification regarding the interchangeable use would benefit all stakeholders including individuals.