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Aadhaar to assume social security status in India

According to an article published in the Financial Express, the Indian government is working towards assigning Aadhaar status similar to Social Security in the United States.

Aadhaar is the 12-digit unique identification number issued by the Indian government to every individual resident of India. The Aadhaar project aims to provide a single, unique identifier which captures all the demographic and biometric details of every Indian resident. Currently, over 1.1 billion citizens have biometric IDs across India under the scheme. This translates to approximately 99 percent of adults in India having an Aadhaar ID.

Earlier this month, India’s national government introduced amendments to the Finance Bill to make Aadhaar mandatory for permanent account number (PAN) applications.

PAN is a unique, 10-character alphanumeric code that acts as an identification for Indian nationals who pay income tax.

PAN is mandatory for a majority of financial transactions such as opening a bank account, receiving taxable salary or professional fees, and executing high-value transactions.

According to the legislative amendment, existing taxpayers will have to link their PAN cards with Aadhaar numbers by a certain date, which is still to be determined.

In the article, Chetan Chandak, Head of Tax Research at H&R Block India, notes: “If Aadhaar gets linked to PAN, the tax department will be successful in obtaining all the information related to taxpayers’ financial transactions and belongings. This will also help the government to relate a particular transaction to a real identifiable person, ultimately eliminating ‘benami’ transactions. The tax department will compare those transactions with the income reported on the tax return of the identified person, and in the instance of any discrepancy, it can immediately be furnished for further investigation. Therefore, it will provide a boost to the government’s drive against black money.”

Although the Aadhaar scheme was initially launched for the provision of social services, the Indian government’s next intention is to extend Aadhaar to the majority of consumer financial transactions. By so doing, the government can work towards reducing ‘benami’ or prohibited transactions in the broader economy.

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