The Lok Sabha on Wednesday passed the amendments to the Finance Bill, which include a provision to make Aadhar mandatory for PAN and income tax purposes, besides amendments to the Companies Act, the Employees Provident Fund Act, Smuggling and Foreign Exchange Act, TRAI Act and Information Technology Act.
Finance minister Arun Jaitley, while answering to questions during debate on the Finance Bill, said Aadhaar will play a vital role in curbing tax evasion. The cabinet also approved amendments in Customs and Excise Act.
The passage of the Finance Bill in the Lok Sabha effectively means that Parliament has passed the bill. The Rajya Sabha does not have any power to reject a money bill.
Under the amended Finance bill, it is mandatory for every person to quote his / her Aadhaar number after 1 July 2017 for applying for a Permanent Account Number (PAN), or filing their Income Tax returns.
In case a person does not have an Aadhaar, he will be required to quote the Aadhaar enrolment number, indicating that an application to obtain Aadhaar has been filed.
Answering questions from opposition parties, including the Congress, BJD and the TMC over Aadhaar being made mandatory for income tax purposes, Jaitley said, ''Yes, we are'' making Aadhaar mandatory.
''Ninety-eight per cent of the adult population have Aadhaar. Why shouldn't we make use of this technology if it helps us catch tax evaders,'' Jaitley asked during his reply to the debate on Finance Bill, which was passed in the evening.
The minister said there have been instances of people using as many as five different PAN cards to evade taxes. ''Since biometrics and iris information is also stored in Aadhaar, it will become much (more) difficult for people to evade the tax net,'' he said.
''We have kept a provision that a person who does not have Aadhaar can say I have applied for Aadhaar. We can't allow people to say I will not make Aadhaar, but through multiple PAN cards will continue to evade taxes,'' he said.
The House also approved the government's proposal to relax conditions for contributions made by corporate entities to political parties, a move that will help broaden channels of political funding.
The amendment removes the cap of 7.5 per cent of average net profits of a corporate entity over a three-year period for political contributions, allowing free flow of corporate funds to political parties. Provisions of the Companies Act will also be amended as part of the Finance Bill.
Till now, corporate entities could contribute only 7.5 per cent of average net profit in the past three financial years.
Electoral bonds: The government proposes incentives for political donations to be paid through digital payments and cheques as part of its efforts to clean up funding in Indian politics. Cash donations have been capped at Rs2,000. Reserve Bank of India will authorise smaller banks to issue electoral bonds - which can be bought by cheque or digital payments - for funding political parties and election campaigns.
Cash transactions: The bill lowers the maximum size of cash transactions to Rs200,000 from Rs300,000 proposed earlier in the budget. In November, Modi decided to scrap high-value currency notes of Rs500 and Rs1,000, accounting for 86 per cent of the money in circulation.
Lowering tax: Corporate tax has been cut by 5 per cent to 25 per cent for small firms with annual turnover of up to Rs50 crore to boost investment. The rate of personal income tax on annual incomes of Rs250,000 to Rs500,000 is lowered to 5 per cent from 10 per cent. A 15 per cent surcharge will be imposed on tax on annual income of over one Rs10 lakh.
Tax exemptions for realtors and start-ups: The bill proposes tax exemptions for real estate developers if they complete their projects in five years - up from the previous three years. The Finance Bill will exempt start-ups from paying income tax for any three consecutive years out of initial seven years after incorporation.
Govt merges administrative tribunals: The government has merged several administrative tribunals and assumed powers to appoint and remove their chiefs, triggering fears the unprecedented move will undermine the authority and independence of these quasi-judicial institutions.
In all, the Finance Bill has incorporated 40 official amendments.