Aadhaar For ITR Filing: What You Need To Know

By | April 13, 2017

Aadhaar For ITR Filing: What You Need To Know

Aadhaar is now more than an identity proof. The government has linked several key schemes and activities to Aadhaar, thus making it a powerful financial instrument. After making the Aadhaar mandatory for receiving direct subsidies, the government has now made it mandatory to quote your Aadhaar number while applying for a PAN card or while filing your income tax returns.

The new rule is expected to be implemented from July 1st, 2017. The Aadhaar linking to your tax filing can be done easily through the e-filing portal of the Income Tax Department.

Why Was This Necessary?

The demonetisation process has thrown up ways to control the proliferation of black money and tax evasion. There have been several instances of individuals creating multiple PAN numbers with minor changes to their personal details.

However, there have been no methods in place to check such practices. With multiple PAN numbers, an individual can open multiple income channels or bank accounts to evade taxes. But, with the Aadhaar coming into the picture, these old tricks won’t work. Without an Aadhaar number linked to them, PAN numbers would become inoperative.

Advantages of Aadhaar Linking

By linking Aadhaar to your PAN and tax-filing, the government will not only be able to identify and clamp down on PAN frauds, but will also be able to access an individual’s additional Aadhaar-linked information such as bank records, health records, phone records, travel data etc. With the convergence of all these data points, it would become very hard for citizens to commit financial crimes.

Once your tax filing and Aadhaar are linked, you can quote your Aadhaar number to fetch your data. It will shorten the processing time during instances when proof of income is required to be furnished.

Banks and other lending institutions ask for income and tax details before sanctioning loans. Some people manipulate their tax filings to show higher income in order to get loans. But, with Aadhaar making manipulative practices like this a lot tougher to carry out, banks will be able to access the correct tax details of loan applicants. This will, in turn, reduce their lending risks, and thus improve the NPA situation.

Difficulties of Aadhaar Linking

The main concern raised by experts and analysts over Aadhaar linking is the potential threat to user privacy and data security. The government has, on several occasions, assured citizens that Aadhaar data is safe and secure.

However, there have been missteps such as the recent online data leak, where the personal details of lakhs of individuals were found through a Google search on a union ministry website. More measures need to be taken to reduce the possibility of identity theft and misuse of biometric data.

The Supreme Court of India has already ruled that Aadhaar cannot be made mandatory for several services. The civil society must work with government agencies to ensure that the privacy of individuals is not infringed upon by the state, and that there are laws in place to prevent misuse.

Linking Aadhaar to income tax filing and PAN numbers should clamp down on tax evasion in the long run. But, at the same time, it needs to be supported by a strong data protection and privacy policy.


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