Frequently (Not) Asked Questions - Why File Income Tax When My PAN Is Connected Everywhere?

You know you've thought about this every time you file your income tax - Why should I go through the tedious process of filing income tax when my PAN card is connected to every transaction I make? We do to. So we went searching the answer to this frequently (not) asked question. And here's what we found out.

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What is the role of PAN in filing ITR? Can ITR be filled without a PAN?

Until September 1st 2019, it had been mandatory to quote your PAN when filing income tax return. However, w.e.f. 1st September 2019, every person who has been allotted a PAN and has interlinked the Aadhaar number and PAN, may furnish the Aadhaar number instead of PAN for all the transactions where the otherwise quoting of PAN is mandatory as per Income-tax Act. Thus, such assessee can file the ITR by quoting the Aadhaar number instead of PAN.

What about those who do not have PAN?

For those who do not have a PAN and are filing the ITR with the Aadhaar, such individuals would be deemed to have applied for a PAN, and thus CBDT would automatically allot a PAN to such assessees.

Is it mandatory to file ITR for everyone who has PAN?

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No. ITR filing is mandatory only if you are liable to file due to your (resident individual's) gross total income during the financial year exceeding the basic income exemption limit(depending on the tax regime chosen). However, there are certain exceptions to the above basic income exemption limit rules, wherein even if the gross total income does not exceed the exemption limit, the individual would still have to mandatorily file ITR irrespective of the tax regime chosen.

These conditions are - Individual has spent an amount or aggregate of amounts exceeding Rs 2 lakh for himself/herself or any other person for travel to a foreign country; Individual has deposited an amount or aggregate of amounts exceeding Rs 1 crore in one or more current accounts maintained with a bank or co-operative bank; Individual has paid electricity bill exceeding Rs 1 lakh in a single bill or on aggregate basis during the financial year; Ordinarily resident individual having income from foreign countries and/or assets in foreign countries and/or having signing authority in any account outside India; and if an individual's gross total income exceeds the exemption limit before claiming tax exemption on capital gains under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB of the Income-tax Act, 1961

Besides these, filing the ITR would be compulsory in case tax has been deducted from your income but your gross total income is below the basic exemption limit. In such cases, the ITR has to be filed in order to claim the income tax refund.

Aren¡¯t ITRs being pre-filled currently? Why do I need to file the ITR then?

Yes, the Central Board of Direct Taxes (CBDT) had announced the introduction of pre-filled ITRs w.e.f AY 2021-22 (i.e. FY 2020-21). However, only specific details in ITR 1 and 2, like salary income, Tax payments, TDS, interest, dividend and capital gains, etc would be pre-filled as per the information fetched from third parties. Also, the taxpayer should cross check all the pre-filled details, as discrepancies can later lead to receiving of notices/queries from Income tax department due to any mismatch. Moreover, as this is a new initiative from the government, some pre-filled are allowed to be edited by the taxpayer to avoid any mismatch in the actual and quoted figures.

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When almost everything, including Aadhaar, Bank account, investments, etc. are connected to my PAN, why do I need to file the ITR?

Although the government is taking gradual steps towards completely automating and pre-filling your ITR someday in future to ease the burden of filing it manually and also aim to prevent tax escaping or revenue leakages, currently, as only specific details are fetched from multiple sources like banks, mutual fund houses etc, which too has been kept partially editable in the hands of taxpayer to prevent information mismatch, filing the ITR and checking the details mentioned is a necessity despite almost every financial transaction in the digital world being connected to your PAN. Also, given the wide gamut of financial transactions people make, the numerous parties involved and the compliance plus tweaks required on their part to increase automation, even pre-filled ITRs would in all likelihood require authentication from the taxpayer's end, again, to avoid any discrepancies.

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