Tax dept makes obtaining PAN tougher to check fraud

25 January 2014

In an attempt to prevent financial fraud, the government has made it more difficult than ever to obtain a Permanent Account Number card, the generally-accepted proof of identity for Indians as wide penetration of the much-touted 'Aadhaar' number is still far from sight.

The Central Board of Direct Taxes today issued a notification saying applicants for a PAN will have to produce original documents proving identity, address and date of birth for verification at the time of applying. The documents would be returned after verification.

The changes will come into effect from 3 February, the CBDT statement said.

An official said the decision was taken after the department noticed a number of cases where people were giving false information in the application to get more than one PAN, or to get one without being eligible for it.

About 1.4 million new PAN cards are issued every year by the department, which is able to verify details of only 0.2 per cent of applicants.

While the move may be well-intentioned, it ends up increasing problems for bona fide applicants.  ''The department is asking for self-attested as well as original documents. This will make it more difficult to obtain a PAN, particularly for foreigners. People might not be comfortable sharing original documents with consultants. There are practical challenges which might unfold in the coming days and we hope for more clarity,'' Business Standard quoted Amarpal Chadha, tax partner at EY, as saying.   

A CBDT official agreed that the move might cause discomfort to some people, but said the intention was to make the system foolproof, as the department had found that some foreign nationals were using PAN as proof of identity. In most of these cases, a fake certificate of identity and address signed by a Member of Parliament was issued.

Under income tax rules, a depository account statement, bank account statement / passbook, ration card, passport, voter identity card, driving licence, property tax assessment order and a certificate signed by a Member of Parliament, a Member of a Legislative Assembly, a municipal councillor, or a gazetted officer are accepted as proof of identity as well as address.

Currently, about 140 million people have a PAN card in India, of which only 34 million file income tax returns. Many people who don't file returns obtain a PAN for its value as proof of ID.

Of the total PAN allotment, 96 per cent are under the category of 'individual' applicants and the highest fake/duplicates are also observed under this category.

In March 2011, after finding a huge mismatch between the number of PAN holders and the number of tax return filings, the Comptroller & Auditor General of India had asked the I-T department to ensure that a single taxpayer was not issued multiple cards.

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