Impact of the New Income Tax Bill on PAN and Aadhaar: Complete Details

The Finance Minister, Nirmala Sitharaman, recently introduced the new Income Tax Bill in the Lok Sabha, aiming to bring significant changes to tax-related rules. A key focus of the bill is to simplify regulations surrounding PAN (Permanent Account Number) and Aadhaar. Here’s an in-depth look at how this bill affects your PAN and Aadhaar:

Your PAN Could Be Cancelled

Under the new bill, individuals eligible for an Aadhaar number must link it with their PAN while applying for a PAN card or filing Income Tax Returns (ITR).

• If a PAN holder is eligible for Aadhaar but fails to notify their Aadhaar number to the Income Tax Department, their PAN may be cancelled.
• This emphasizes the mandatory nature of linking Aadhaar and PAN for compliance with tax regulations.

Mandatory Updates to Tax Officers

If any changes occur in the details associated with your PAN—such as your name, address, or business details—you must inform the Income Tax Officer.

• For individuals without a PAN, Aadhaar can now be used as a substitute for PAN.
• However, those using Aadhaar in place of PAN must notify the Income Tax Department about this substitution.

Who Must Obtain a PAN?

The new bill specifies categories of individuals and entities required to have a PAN:

1. Businesses/Professionals:

   • Any individual involved in a business or profession with annual sales exceeding ₹5 lakh must have a PAN.

2. Key Roles in Organizations:

   • Individuals holding significant positions, such as directors, partners, or trustees in a company or institution, must have a PAN.

3. Restriction on Multiple PANs:

   • An individual or entity cannot possess more than one PAN, ensuring transparency and preventing misuse.

Simplification for Tax Compliance

The new bill allows greater flexibility by enabling Aadhaar to act as a PAN substitute. This change aims to ease compliance and encourage wider participation in the tax system, especially for individuals without a PAN.

By mandating PAN-Aadhaar linkage and simplifying processes, the government intends to improve tax administration and reduce fraud or discrepancies in financial records.

For businesses and individuals alike, staying updated on these changes is crucial to avoid penalties or complications.

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