Supreme Court ruled that the linking of PAN with Aadhaar is mandatory to file income tax returns from April 1, 2019 onward, it is mandatory for even those who do not need to file returns.
According to Section 139AA of the Income Tax Act, not only is PAN mandatory for filing income tax returns but it is also mandatory to link Aadhaar while applying for PAN card.
In case of failure to link the Aadhaar number, the permanent account number shall be deemed to be invalid.
The reason behind mandatory provision is to avoid tax evasion because number of PAN card holders far exceeds the number of people filing income tax returns. Income tax returns filed stands at just about 16% of the total number of PANs allotted.
One major problem arising out of the mandatory linking of the two IDs is that many people in South India have name mismatch. Many people have abbreviations in their names in Aadhaar, whereas the PAN does not allow abbreviations.