Experts believe this Aadhaar-based verification initiative will strengthen the government's Digital India campaign and is a significant step towards increased transparency and accountability in the tax system.
The government has taken another major step towards making the income tax system in the country transparent and digital. The Central Board of Direct Taxes (CBDT) has announced the implementation of a new provision from July 1, 2025, making significant changes to the rules for obtaining a PAN card. Under this new rule, Aadhaar number and its electronic verification will be mandatory for obtaining a new PAN card.
Until now, Aadhaar was not mandatory for a PAN card, but after this change, no individual will be able to obtain a Permanent Account Number (PAN) without an Aadhaar number. This rule will not only bring transparency to tax administration but will also curb irregularities such as tax evasion and the creation of fraudulent PAN cards.
What is the new rule?
From July 1, 2025, providing an Aadhaar number will be mandatory for obtaining a new PAN card. Simply providing the Aadhaar number will not suffice; electronic verification will also be necessary. This means that when you apply for a PAN card online or offline, your Aadhaar will be verified using biometric data or OTP. If the Aadhaar is not verified, the PAN card application will be rejected.
What was the system like before?
Until now, Aadhaar was not mandatory for obtaining a PAN card. Any individual could obtain a PAN card by submitting valid identification documents such as a voter ID, passport, or driving license, along with a birth certificate. However, under the new rules, a PAN card will not be issued without Aadhaar.
Why did the government take this step?
The CBDT and the Ministry of Finance believe that this step will accelerate digitization and help ensure tax compliance. Experts say that in India, multiple PAN cards are often created in one person's name to evade taxes. Some people also obtain PAN cards using fake identities and misuse them. However, since Aadhaar has been made mandatory, it has become possible to control such irregularities.
What will happen for existing PAN card holders?
This new rule applies to those obtaining a PAN card for the first time. Another important rule is already in place for existing PAN card holders. They must link their PAN card with their Aadhaar by December 31, 2025. If an individual fails to do so by the deadline, their PAN card will be deactivated.
A deactivated PAN card means the individual cannot use it for banking services or file tax returns. However, the government has provided this final deadline for linking PAN and Aadhaar without any late fees.
Curbing fraudulent PAN cards
A major concern has been that many people obtain more than one PAN card using fake identities. These are then used in activities such as money laundering, hawala, or benami property transactions. Now, with Aadhaar-based verification, this will become impossible, as only one PAN can be created with one Aadhaar number.
According to the Income Tax Act, an individual cannot possess more than one PAN card. If an individual is found to have two or more PAN cards, a penalty of ten thousand rupees can be imposed.
Ease in tax filing
The new rule will also simplify the tax filing process. When the PAN card and Aadhaar are linked and the Aadhaar is verified, there will be no difficulty in verifying identity during tax filing. This will also simplify the Income Tax Department's profiling of taxpayers and speed up the tax return process.
A major step towards digitization
The government is continuously working towards Digital India, and the Income Tax Department is also transforming its processes digitally. Issuing PAN cards through Aadhaar and making electronic verification mandatory is a step in this direction. This will eliminate the role of intermediaries and enable citizens to access government services directly and securely.
Who can apply for a PAN?
The government has clarified that only individuals possessing an Aadhaar number can apply for a PAN card. The Aadhaar number must be entered in the PAN application form and verified through OTP or biometric authentication. For children who do not possess an Aadhaar number, there will be an option to submit the Aadhaar number through a guardian.
Benefits of Aadhaar-PAN linking
For those who already have a PAN, linking it to Aadhaar is also essential. Doing so facilitates OTP-based verification during tax filing. Additionally, in the future, the Aadhaar-PAN pair will be given priority as proof of identity in any banking or financial service.
What do experts say?
Financial experts say that this change is a necessity. With the increasing use of technology, integrated use of technology in tax administration has also become necessary. One expert said that this rule is helpful for honest taxpayers and can become an effective weapon to prevent tax evasion.
Advice for citizens
If you are planning to obtain a PAN card, keep your Aadhaar number ready after July 1, 2025. If you have already obtained an Aadhaar, ensure that it is updated and the information recorded in it is correct. If you already have a PAN card, link it to your Aadhaar in time to avoid any problems.
