As you may be aware, Finance Act, 2017 has imposed a new requirement regarding furnishing Aadhaar number in income tax return for FY 2017-18. This requirement was not there in the Finance Bill 2017 and given that filing tax returns is just some months away, there has been a great deal of confusion amongst everyone (especially NRI community) on what to do and how to comply with this situation.
In this context, I am today discussing the requirement and how its impact on NRI, seafarers and expats working in India.
New Section 139AA on Aadhaar requirement
First let us see the finer wordings of new Section 139AA inserted by Finance Act, 2017
56. After section 139A of the Income-tax Act, the following section shall be inserted, namely:—
‘139AA. (1) Every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017, quote Aadhaar number—
(i) in the application form for allotment of permanent account number;
(ii) in the return of income:
Provided that where the person does not possess the Aadhaar number, the Enrolment ID of Aadhaar application form issued to him at the time of enrolment shall be quoted in the application for permanent account number or, as the case may be, in the return of income furnished by him.
(2) Every person who has been allotted permanent account number as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to such authority in such form and manner as may be prescribed, on or before a date to be notified by the Central Government in the Official Gazette:
Provided that in case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be deemed to be invalid and the other provisions of this Act shall apply, as if the person had not applied for allotment of permanent account number.
(3) The provisions of this section shall not apply to such person or class or classes of persons or any State or part of any State, as may be notified by the Central Government in this behalf, in the Official Gazette.
Explanation.—For the purposes of this section, the expressions—
(i) “Aadhaar number”, “Enrolment” and “resident” shall have the same meanings respectively assigned to them in clauses (a), (m) and (v) of section 2 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016;
(ii) “Enrolment ID” means a 28 digit Enrolment Identification Number issued to a resident at the time of enrolment.’
Now, from a reading of above, following things are amply clear:
- The new rule will apply for returns filed/PAN applied for/PAN quoted in any document ON OR AFTER 01/07/2017 – hence, the requirements DO NOT apply at all before 01/07/2017
- The requirement applies only to a person “eligible” to apply for Aadhaar – hence, if you are not eligible for Aadhaar, this rule does not apply to you, even after 01/07/2017 (I am discussing it later in the article)
- Apart from mentioning Aadhaar number, you also need to have linked your PAN with Aadhaar – this is also a mandatory requirement effective 01/07/2017
For ease of understanding, I have captured the requirement in a visual way below:
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Meaning of “Resident” as per Aadhaar Act, 2016
Now we come to the meaning of “eligible to obtain” in Section 139AA – for this, we have to see provisions of Aadhaar Act as follows:
“2. ….
.(v) “resident” means an individual who has resided in India for a period or periods amounting in all to one hundred and eighty-two days or more in the twelve months immediately preceding the date of application for enrolment;
3. (1) Every resident shall be entitled to obtain an Aadhaar number by submitting his demographic information and biometric information by undergoing the process of enrolment:
Provided that the Central Government may, from time to time, notify such other category of individuals who may be entitled to obtain an Aadhaar number
….”
We can draw following inferences from the above:
- Only “Resident” is entitled to Aadhaar number
- Meaning of “Resident” is that person should have stayed (actually, it says “resided”) for => 182 days in India as on date of enrolment
- Resident does not have any relation to citizenship – so, by that logic, even an expat residing in India is entitled to Aadhaar
- As on date, NRI/PIO not residing in India are not notified – there are plans to do so but nothing has materialized yet – read this news report
Aadhaar is not a mandatory field in income tax return forms for AY 2017-18
Almost all income tax forms for AY 2017-18 are out and I have checked the IT return filing utilities as regards whether Aadhaar field is made mandatory or not – the fact is that it is not mandatory even of residential status is quoted as “Resident”
Hence, for a person on whom these requirements DO NOT apply, there is no problem filing tax return even after 01/07/2017
However, for those whom it is mandatory and return is filed on or after 01/07/2017 – though aadhar field is not mandatory, by skipping the information in that field, your return can be deemed as a defective return u/s 139(9) of ITA – it is equivalent to not filing the tax return. Hence, such individuals should be careful to disclose Aadhaar number/enrolment ID as applicable.
Impact of this provision on various categories of NRIs:
Below, I am trying to capture the impact of this development to various categories:
- NRI residing out of India – comes to India every year for brief visits only:
Requirement is not applicable to you, relax. If your income is below qualifying exemption limit, anyways no need to file return in India. However, if you are considering filing a return, you can do in a normal way. Leave “Aadhaar” field in return form blank.
Also read:
- NRI spending substantial time in India:
This mostly applies to my seafarer friends who plan their work in such a way that they are < 182 days in India for a previous year, and hence are categorized as “non-resident”.
For such seafarers, please note that residency requirements under ITA and Aadhaar Act are different. The implications thus, are as follows:
- Filing a tax return in India before 01/07/2017: No problem.
- Filing a tax return in India on or after 01/07/2017: Make sure that on the date of filing tax return (say X) you have NOT been residing in India for 182 days for period (X- 365), if yes, you cannot file a return without quoting your Aadhaar and if you do so, it can be deemed as “defective”
- NRI returned to India/Resident of India (includes PIO/Expats) etc:
- Filing a tax return in India before 01/07/2017: No problem.
- Filing a tax return in India on or after 01/07/2017: Make sure that on the date of filing tax return (say X) you have NOT been residing in India for 182 days for period (X- 365), if yes, you cannot file a return without quoting your Aadhaar and if you do so, it can be deemed as “defective”
It may be noted that Government has not given any leeway yet (as I write the post on 10/04/2017) to PIO and expats. So, even if you are a US citizen residing in India, if you’re eligible for Aadhaar, you need to apply for it, and quote it in your tax return.
Question 1: As abundant precaution, should NRI apply for Aadhaar on their next visit to India?
In wake of this requirement, some diligent NRIs may want to add “Applying for Aadhaar” as a checklist point for their next visit to India.
In my view, such NRI should first check if they are allowed to apply for Aadhaar. Because if they are not, an application for enrolment in Aadhaar database may be construed as a violation of Aadhaar Act. Please note that the Indian Government has still not opened the gates for Aadhaar application for NRIs.
In most probability, the NRI would not be eligible for Aadhaar – in this situation, my view will be, let it go by. Anyways the ITA requirement does not make quoting of Aadhaar mandatory for you, so why the hurry. So, just because you’re in a hurry to stay compliant with ITA (which is a good intention on your part!), it is not a sound move to violate provisions of another Act. And also aren’t there better things to do on the limited time that you get on the India tripJ
Question 2: Quoting Aadhaar at the time of revised return
If you are eligible to apply for Aadhar but due to some reason, you have filed your original return before 01/07/2017 without quoting Aadhar and later (after 01/07/2017) due to some reason you need to file a “revised return” – in my view, you need to quote the Aadhaar number in that revised return else that revised return can be deemed as “defective” and will not be considered by the Income Tax Department.
Question 3: What if I’m unable to link PAN with Aadhaar?
After this announcement, many people went to IT e-filing website and tried to link Aadhaar with PAN, as required u/s 139AA. However, in many cases, it did not work. The reason is that while PAN recognises single characters like S NARAYANAN, Aadhaar does not – if Aadhaar mentions it as “SHIVA NARAYANAN”, the linking will not work. Some news reports on this issue are as follows:
In such cases, my suggestion will be to file the tax return before 01/07/2017. Once you do this, you’ll get at least some breathing room wherein you can either make changes in PAN or Aadhaar and retry the linking.
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