The government might soon make Aadhaar mandatory for buying shares and mutual funds to prevent the conversion of black money into white through the stock market, the Economic Times reported on Thursday.
According to the financial daily, the government and the Securities and Exchange Board of India (Sebi) are planning to link financial market transactions to Aadhaar after, according to two sources cited by the report, the former came to realise that the permanent account number (PAN) might not be sufficient in putting an end to tax evasion.
"We have been told that making Aadhaar compulsory is in the offing," a top official with a financial services firm told the financial daily.
However, according to a CEO of a brokerage firm, who spoke to the financial daily on the condition of anonymity, the move could unsettle some "regional players" who could see a "dip in activity even in IPO market". However, the source said this dip would be temporary. According to the unnamed CEO, these players would be worried over how many clients would remain once Aadhaar is made mandatory.
According to the report, when such a compulsory linking will come into effect is unclear. Further, it is not known yet whether the Aadhaar will serve as the sole identification number for financial market transactions, thereby replacing the PAN.
Is PAN not enough?
Brokers who spoke to the financial daily said that PAN has not been able to prevent people from using the stock market for money laundering. They said that multiple PANs and fake demat accounts were being used to bring in black money into the stock market.
The news comes after the government, as reported earlier, deleted or de-activated more than one million PANs in a move to check fake identities. Reportedly, as on July 27, 11,44,211 duplicate PANS have been identified, said the Indian Express.
Aadhaar has quickly proliferated into various areas as the government's preferred form of identification.
As reported earlier, Finance Minister Arun Jaitley, through an amendment to tax proposals in the Finance Bill for 2017-18, had made linking Aadhaar to PAN mandatory for filing income tax returns.
The revenue department has said that "every person who has been allotted PAN as on July 1, 2017, and who in accordance with the provisions of sub-section (2) of section 139AA is required to intimate his Aadhaar number, shall intimate his Aadhaar number to the principal director-general of income tax (systems), or DGIT (systems)".
As reported earlier, the new deadline for Aadhaar-PAN linking is August 31.
Also, the government had in October last year made the unique identification number mandatory for everyone to get LPG subsidies. In March this year, it was extended for free cooking gas connections to women of BPL households.